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DJIA 20949.89 À 0.17%
What’s
News
Business & Finance
B arclays’s CEO is clash-
ing with KKR, one of the
firm’s most powerful clients,
in a dispute involving the
banker’s brother-in-law. A1
 Apple extended its re-
bound last quarter with an
increase in profit and reve-
nue, but iPhone shipments
fell 1% from a year ago. A1
 A Facebook engineer re-
ported that code written by
women was rejected more of-
ten than that of men, spark-
ing a gender-bias debate. A1
 U.S. auto makers reported
sluggish demand for SUVs
and trucks, a sign the indus-
try hot streak is cooling. B1
 Berkshire should dis-
close its political contribu-
tions, two shareholder ad-
visory firms said. B7
 BP swung to a profit
last quarter, benefiting
from higher oil prices and
production volumes. B3
 Mastercard reported
higher-than-expected reve-
nue and per-share earnings
as transactions increased. B7
 Alitalia shareholders
agreed to ask the Italian
government to step in to
help the troubled carrier. B3
 U.S. lawmakers warned
airlines they faced more
regulation if they don’t im-
prove customer service. B1
 Trump plans to replace
the comptroller of the cur-
rency, signaling a change
in financial oversight. B6
 Mylan’s chairman re-
ceived some $164 million in
2016, a year marked by a fu-
ror over EpiPen prices. B2
World-Wide
 Greece agreed to a deal
with its international credi-
tors on fresh austerity mea-
sures to keep its $93.74 bil-
lion bailout on track. A1
 House GOP leaders are
on the brink of losing too
many Republican votes to
pass their bill to overhaul
the health-care system. A6
 Trump said a government
shutdown and a change in
Senate rules might be
needed to get his priorities
through Congress. A6
 North Korea protested a
flyover of two U.S. super-
sonic bombers, as the CIA
chief wrapped up a three-
day visit to South Korea. A3
 Kushner didn’t disclose
his stake in a real-estate-
tech firm as well as a num-
ber of loans from properties
and banks he co-owns. B1
 Le Pen’s campaign ad-
mitted she lifted sections of
a speech Fillon gave before
he was knocked out of the
French presidential race. A4
 Track and field officials
proposed wiping out over
half of Olympic world re-
cords as they called for
stricter antidoping rules. A2
 The EU won’t impose vi-
sas on American travelers in
retaliation for a U.S. policy
affecting five nations. A4
 Putin dismissed allega-
tions of Russian interference
in the U.S. presidential elec-
tion as “simply rumors.” A5
 Palestinian officials in
the West Bank urged
Hamas to reconcile with the
Palestinian Authority. A5
CONTENTS
Business News...... B3
Crossword.............. A12
Heard on Street... B10
Life & Arts......... A9,12
Management.......... B5
Markets................... B10
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Company. All Rights Reserved
* * WEDNESDAY, MAY 3, 2017 ~ VOL. XXXV NO. 64 WSJ.com EUROPE EDITION
NASDAQ 6095.37 À 0.06% NIKKEI 19445.70 À 0.70% STOXX 600 389.53 À 0.75% BRENT 50.46 g 2.06% GOLD 1255.10 À 0.14% EURO 1.0913 À 0.12%
Putin Denies Russia Tampers With Foreign Elections Battered
Greece
Accepts
New Deal
BY NEKTARIA STAMOULI
ATHENS—Greece agreed to
a deal with its international
creditors on Tuesday on fresh
austerity measures to keep its
€86 billion ($93.74 billion)
bailout on track.
The accord cleared the way
for debt relief talks that offer
Greece a chance to heal its
economy and avert another
crisis in the European Union.
MICHAEL KAPPELER/DPA/ZUMA PRESS
Since Greece’s first bailout
in May 2010, its economy has
been in nearly constant de-
cline, having shrunk more than
25% in seven years under the
pressure of €70 billion of
spending cuts and tax in-
creases demanded by interna-
tional creditors.
The economic crisis has
BLACK SEA MEET: At a news conference in Sochi with German Chancellor Angela Merkel, Russian President Vladimir Putin dismissed been as severe as the 1930s
allegations of interference in the 2016 U.S. presidential election. He also denied any intent to interfere with coming European elections. A5 Great Depression in the U.S.,
but has lasted longer, accord-
ing to International Monetary
Fund calculations.
Now, Prime Minister Alexis
GOLDMAN SACHS EMBRACES Tsipras is betting that by con-
ceding to more belt-tighten-
ing, including pension cuts and
BANKING’S BLAND SIDE a broadening of the tax base,
he can win a bigger prize: a re-
structuring of Greece’s crush-
ing €315 billion debt that will
lure back international inves-
tors and revive its economy.
The investment bank, seeking growth beyond its elite turf, turns to lending; takeovers to remodels But Greece must first win
the support of a German gov-
BY LIZ HOFFMAN mansions and art, and make personal nesses that churn out safe, if smaller, ernment wary of conceding
loans for things such as kitchen remod- profits. Most in the finance industry be- too much ahead of national
Goldman Sachs Group Inc. earned its els and fixing broken windshields. lieve trading revenues will never return elections in September.
elite reputation by dominating the It is exploring new credit businesses to precrisis levels. A restructuring and a re-
glamorous end of finance—investment such as trade finance, equipment leas- Goldman ranks among Wall Street’s turn to the capital markets
banking, trading and managing money ing and extending credit that consum- top players in its core businesses, such could mark a turning point.
for the wealthy. ers use for online purchases, according as advising on corporate mergers and Years of thorny negotiations
In the postcrisis world of Wall Street, to people familiar with the discussions. underwriting stock sales, offering little have exacted an enormous so-
however, these standbys aren’t provid- “We’re a bank,” Chief Executive room for growth. In lending, “we can cial and economic toll and
ing the kind of growth it wants. So Lloyd Blankfein said in a February in- only go up,” said Stephen Scherr, who threatened a crash out of the
Goldman is expanding its reach with a terview. “We should act like one.” oversees the effort as CEO of Goldman euro, a potential earthquake
prosaic strategy it once avoided. That Goldman is branching out, after Sachs Bank USA. for the common currency.
Lending people money. long sticking to its knitting as rivals di- Loans outstanding across Goldman Pressure has been rising on
The firm has been opening its check- versified, shows the challenges facing have doubled to $95 billion since 2011, Athens as politicians in Europe
book for the past several years to fi- Wall Street this decade. Investors have filings show. Real-estate loans are up try to avoid making unpopular
nance corporate takeovers, lend against been rewarding firms with diverse busi- Please see LEND page A8 Please see DEBT page A4
China's Tax Deficit
Barclays’s Chief Firms in China pay more taxes
when all forms of business tax
Facebook Battles
are factored in*. A3
Feuds With KKR China
India
68.0%
60.6
Gender-Bias Claim
Germany 48.9
Barclays PLC Chief Executive by the family of Mr. Staley’s Japan 48.9
BY DEEPA SEETHARAMAN that their coding faced more
Jes Staley is clashing with one wife, Debora Nitzan Staley. She scrutiny than men’s.
U.S. 44.0
of the bank’s most powerful cli- and her brother, Jorge Nitzan, Last year, a longtime engi- The results touched off a
ents, KKR & Co., after wading Aceco’s then-chief executive, Vietnam 39.4 neer at Facebook Inc. gathered debate within Facebook over
into a dispute between the pri- sold the bulk of their interest South Korea 33.1 data that revealed a controver- alleged gender bias among
in the company to KKR in 2014 Thailand 32.6 sial finding: Code written by some of its most-valued em-
By Jenny Strasburg, in a deal valued at around Indonesia 30.6 women was rejected much ployees: the engineers who
Patricia Kowsmann $700 million. Entities con- Hong Kong 22.9 more frequently than code writ- build the features used by
and Max Colchester trolled by Ms. Staley and her ten by their male colleagues, ac- nearly two billion people ev-
World average 40.6
brother received some $160 cording to people familiar with ery month. Chief Executive
vate-equity giant and his million and $80 million respec- *Before deductions Note: As a proportion the matter and screenshots of Mark Zuckerberg was asked
brother-in-law, according to tively as a result of the sale, of company profits, based on data for 2016 internal discussions viewed by about the findings during a
or the most recent available.
people familiar with the matter. according to people familiar Source: World Bank The Wall Street Journal. weekly town hall meeting.
At the center of the dispute with it. THE WALL STREET JOURNAL. For many female engineers The outcry prompted senior
is a Brazilian data-center com- A year later, Aceco was un- at Facebook, the finding con- Facebook officials to conduct
pany, Aceco TI, founded in 1972 Please see STALEY page A2 firmed long-held suspicions Please see CODERS page A2
INSIDE
Crime Weave! Salons Busted for
‘Unlawful’ Displays of Barber Poles
i i i
Tired of having the symbol co-opted,
investigators fine those who appropriate it
ETYMOTIC RESEARCH, INC
BY JENNIFER LEVITZ the word. Appropriation of the
AFP/GETTY IMAGES
AFP/GETTY IMAGES
barber pole is a “big deal,”
Sarah Lounder, the owner said Renee Patton, president
of Cuts on Main salon in the of the group and the owner of
small town of Winchester, the Barber Shop of Boiling
N.H., recently got a violation Springs in Inman, S.C.
that just about made her hair “We see it in every state,”
stand on end.
The New Hampshire
said Ms. Patton, noting that
protecting the barber
PYONGYANG KUSHNER THE BIG
Board of Barbering, pole will be discussed PROTESTS DIDN’T DISCLOSE DEBATE ON
Cosmetology & Esthet-
ics fined Ms. Lounder,
at NABBA 2017, the bar-
ber association’s next
U.S. FLYOVER TECH STAKE HEARING AIDS
alleging that a strip of annual meeting in Sep-
bricks painted red, tember. “It’s just cheat- WORLD NEWS, A3 BUSINESS & FINANCE, B1 LIFE & ARTS, A9
Markets Digest..... B8 white and blue outside ing,” she added. “The
Opinion.............. A10-11
Property Report... B9
her salon resembled a cosmetology field does
Technology............... B4
U.S. News............. A6-7
Weather................... A12
World News........ A2-5
barber pole and thus
amounted to mislead-
ing advertising. She
A barber
pole
not have a symbol so
now they’ve now they
encroached on ours.
Apple Continues Its Comeback
must repaint them or They’re trying to be BY TRIPP MICKLE Apple released last September, erage selling price for the
hire a barber, the notice said. something they’re not.” weren’t enough to boost over- phone—by far Apple’s biggest
“Are you kidding me?” said State regulations often de- Apple Inc. extended its re- all iPhone unit shipments, product—helped drive total
Ms. Lounder, who opened her lineate hairdressers from bar- bound in the latest quarter which fell 1% from a year ago revenue in the second quarter
salon in an old building along bers, and the two fields un- with rising profit and a second in part, Apple said, because of up 4.6% to $52.9 billion.
the river in June 2016. “You’re dergo different training. consecutive increase in reve- reduced inventories. Profit in the three months
going to have all these piddly Barbers generally have nue, but tepid iPhone demand The 50.8 million phones through April 1 rose 4.9% to
little regulations?” more leeway with razors— will likely increase pressure to shipped during the latest pe- $11.03 billion, or $2.10 a share.
But the crackdown is good rules that can make it harder deliver a big hit with its new riod also fell short of the re- Analysts surveyed by Thomson
news to the National Associa- for hairstylists to “clean up 10th-anniversary handset later cord 61.2 million in the same Reuters expected earnings of
tion of Barber Boards of the fuzzy little neck hairs,” this year. period in 2015. $2.02 a share and $52.97 bil-
America, which is spreading Please see BARBER page A8 Sales of the iPhone 7, which Still, an increase in the av- lion in revenue for the quarter.
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
A2 | Wednesday, May 3, 2017
Track and Field Records Could Be Erased
Report recommends
stricter antidoping
measures; critics call
some changes unfair
BY SARA GERMANO
Track and field officials
have proposed revisions that
would wipe more than half of
Olympic-discipline world re-
cords from the books, a dras-
tic step to clean up the image
of a sport dogged by a long
history of doping.
The European Athletics
Council called on Monday for
stricter antidoping standards
and for removing perfor-
mances that failed to meet
those rules from world record
lists. The proposal seeks to en-
sure “today’s generation of
athletes are not chasing re-
cords set in completely differ-
ent circumstances” and “to re-
gain public trust,” according
to the council’s report.
The new standards mandate
that athletes’ test samples be
kept for a period of up to 10
years, among other guidelines.
The International Association
of Athletics Federations, track
and field’s global governing
body, began storing antidoping
samples in 2005, according to
STALEY
Continued from Page One
raveling amid Brazil’s tumbling
economy, and KKR is fighting a
pitched legal battle in São
Paulo against Mr. Nitzan and
the other sellers. KKR, with
close to $475 million in Aceco
equity at stake, is trying to get
its money back.
KKR’s beef with Mr. Staley is
that the CEO interceded on be-
half of his brother-in-law, by
trying to help him find an in-
vestor late last year, after the
2014 acquisition went sour,
and by vouching for him with
KKR’s two big co-investors in
the deal. KKR’s view, according
to people familiar with it, is
that Mr. Staley’s actions put
Barclays at odds with KKR’s in-
terests as a client.
Mr. Staley’s view, according
to people familiar with it, is
that KKR improperly pressured
the CEO and is trying to turn a
personal situation for the exec-
utive into a business matter for
the bank. Mr. Staley has told
multiple people that he wasn’t
acting in his capacity as Bar-
clays’s CEO when he interceded
for his brother-in-law, and that
his actions in the dispute were
what anyone would do to de-
fend a family member.
Barclays itself had no role in
the Aceco deal. A spokesman
for Barclays said, “Appropriate
senior personnel within Bar-
clays have been kept informed
about this matter, and in par-
ticular regarding any manage-
ment interactions with the par-
ties concerned.”
Recently, KKR executives
have cut Barclays off from
some of their business, people
familiar with the matter said.
A KKR spokeswoman said it
has a responsibility to protect
the interests of its investors,
“who we believe were de-
frauded in the sale of Aceco.”
She continued, “We would also
note that we have been a long-
CODERS
Continued from Page One
their own review of the engi-
neer’s study. In an internal
post published a month later,
Jay Parikh, Facebook’s head of
infrastructure, attributed any
gap in rejection rates to an en-
gineer’s rank, not gender.
Many employees interpreted
this new analysis as a sign
that female engineers weren’t
rising at the same rate as men
who joined the company
around the same time.
In a statement to the Jour-
nal, a Facebook spokeswoman
described the initial analysis
as “incomplete and inaccu-
rate—performed by a former
Facebook engineer with an in-
complete data set.” The
spokeswoman confirmed Mr.
Parikh’s analysis, which was
based on confidential data un-
available to most employees.
The Journal wasn’t able to
independently verify the re-
sults of either analysis or as-
sess their methodology.
At Facebook, coding changes
are subject to a code review by
colleagues, a process similar to
its website. Current world re-
cords that don’t meet the new
guidelines would no longer be
recognized as such but would
remain on an “all-time” list,
according to the European
proposal.
The proposed guidelines
don’t single out specific,
standing world records that
would be subject to elimina-
tion. Of the 47 track and field
events currently contested by
men and women at the Olym-
pic Games, at least 25 would
lose their standing as world
records under the European
plan, according to analysis by
The Wall Street Journal. That
list would include several
women’s sprints, the women’s
marathon and the men’s 1500
and 5000 meter races, as well
as the majority of field
events, such as shot put and
long jump.
The proposal comes amid
hand-wringing within track
and field over a series of scan-
dals in recent years. The Rus-
sian team is still barred from
international competition in
the wake of a state-run doping
regime.
European Athletics Presi-
dent Svein Arne Hansen said
he would urge the IAAF to
adopt his committee’s plan at
the global body’s meeting in
time client of Barclays, which
comes with its own responsi-
bilities for Barclays.” Since
2010, KKR has paid Barclays
$190 million in investment-
banking fees, according to De-
alogic data.
Mr. Nitzan, through a São
Paulo-based spokesman, called
accusations of fraud “base-
less.” “Mr. Nitzan is confident
that the truth will prevail and
that the accusations will be
fully clarified in arbitration,”
the spokesman added.
Mr. Staley, an American,
worked in Brazil early in his
banking career in the 1980s,
met his wife there and has
known her family for decades.
He came to Barclays as chief
executive in late 2015.
In a separate matter, U.K.
regulators have been investi-
gating the CEO after he tried
to unmask a whistleblower
who complained about one of
Mr. Staley’s top hires at Bar-
clays. The board last month
said it would commission inde-
pendent reviews of the bank’s
controls and whistleblowing
program. Mr. Staley has apolo-
gized to Barclays’s board and
in an email to staff last month
said, “I got too personally in-
volved.”
KKR’s acquisition of a con-
trolling stake in Aceco was its
first direct investment in Bra-
zil. Aceco has built more than
800 data storage and process-
ing centers in Brazil and Latin
America; Mr. Nitzan and Ms.
Staley each owned 26%, ac-
cording to Aceco documents,
and private-equity firm General
Atlantic LLC held the remain-
ing 48%. General Atlantic re-
ceived some $290 million for
its stake, according to people
familiar with the 2014 sale.
KKR got 87% of the company
and Mr. Nitzan, who remained
CEO, kept 12.5%.
In May 2015, KKR’s head of
Latin America in São Paulo got
an anonymous email alleging
Aceco’s books had been manip-
ulated since 2012, according to
Tech Industry’s
Diversity Problem
Across the field, companies
have had difficulty hiring
women and minorities
Like other major tech com-
panies, including Google parent
Alphabet Inc. and Apple Inc.,
Facebook has struggled to in-
crease the share of women
and underrepresented minori-
ties in its ranks.
The absence of women is
particularly felt in engineering,
which from college class-
peer-review in academia. The
code shapes the user’s experi-
ence, and experts say the ab-
sence of diverse viewpoints on
a coding team can lead to a
product ignoring the needs of
certain categories of users.
“Especially for mass con-
sumer products, there are just
going to be blind spots,” said
Tracy Chou, a diversity advo-
cate and former software engi-
neer at Pinterest Inc.
The initial analysis found
WORLD NEWS
Florence Griffith-Joyner of the U.S. at the 1988 Summer Games.
August. Questions that will
have to be resolved include
determining who will be re-
sponsible for sample storage
and keeping major track meets
people familiar with the mat-
ter. The emailer also went to
Brazilian police, alleging Aceco
had bribed government offi-
cials with senior management’s
knowledge, these people said.
A KKR-commissioned ac-
counting and legal investiga-
tion determined many of the
anonymous emailer’s allega-
tions had merit, according to a
report reviewed by The Wall
KKR's Targets
Who got what from the 2014 sale of Brazilian data-center company Aceco TI.
Jorge Nitzan
Son of Aceco founders.
CEO at time of sale.
Received
$80 million
Percentage of Aceco
previously owned
26% Retained
12.5%
Note: Approximate proceeds to vehicles controlled by the parties.
Sources: Aceco documents, people close to the deal
Street Journal. It found Aceco
made payments to some enti-
ties now embroiled in the
sprawling bribery and corrup-
tion scandal in Brazil known as
Car Wash.
KKR fired Mr. Nitzan in late
2015. And last year it marked
its equity investment in Aceco
down to zero, according to
people familiar with the deci-
sion. Aceco officials didn’t re-
turn calls.
The spokesman for Mr. Nit-
zan denies he was involved in
fraud. KKR, he said, acquired
rooms to the workplace has
been seen as a man’s field.
Women account for 17% of
technical roles at Facebook,
according to its latest diver-
sity report.
A Facebook spokeswoman
added that there aren’t enough
women at senior engineering
levels at Facebook and across
the technology industry.
Engineers write the code
that is the bedrock of every
feature launched by Facebook,
from nearly imperceptible
tweaks like the color of a but-
ton to new features like Face-
book Stories.
—Deepa Seetharaman
that female engineers received
35% more rejections of their
code than men, according to
screenshots of the engineer’s
report posted last September.
The engineer, who was de-
scribed as having been at
Facebook several years, said
she conducted her analysis “so
that we can have an insight
into how the review process
impacts people in various
groups,” according to screen-
shots of her internal post.
THE WALL STREET JOURNAL.
European commission for their
proposal and called it “a step
in the right direction.”
In a March interview with
The Wall Street Journal, Mr.
Coe identified potential world
record changes as among his
priorities in 2017. He said he
had “asked people to look at
world records “that may be in-
secure,” particularly women’s
world records in the 100, 200,
400 and 800 meters.
On Tuesday, a spokesman
for the IAAF said Mr. Coe is
supportive of world record
changes but is now seeking in-
put from other regional track
officials.
Each of the current
women’s sprint records was
set in the 1980s, during a time
MIKE POWELL/ALLSPORT/GETTY IMAGES
that is perceived to have been
rampant with performance-en-
hancing drug use. Two of
those records, the women’s
100 and 200 meters, are held
by the late Florence Griffith-
Joyner of the U.S. The 400 and
800 meter marks were set by
Marita Koch of the former
German Democratic Republic,
and Jarmila Kratochvílová of
the former Czechoslovakia.
in antidoping compliance. Al Joyner, a track coach
IAAF President Sebastian who is the brother of heptath-
Coe, a two-time Olympic lon world record holder Jackie
champion middle-distance Joyner-Kersee and the hus-
runner for Britain, thanked the band of Ms. Griffith-Joyner,
control of Aceco “just before
the worst recession in the his-
tory of the Brazilian economy,”
which hurt Aceco’s finances and
ship in Brazilian courts.
Meanwhile, in September,
KKR’s private-equity chief for
the Americas based in New
made KKR regret its investment York, Alexander Navab,
and want to reverse it. The placed a call to Mr. Staley to
spokesman, on behalf of Ms. lay out KKR’s side in the con-
Staley, noted she inherited her flict and see if Mr. Staley
Aceco stake and had no man- could influence Mr. Nitzan,
agement role. A General Atlan- according to people familiar
tic spokeswoman declined to with the call.
comment. The call was brief, and Mr.
Debora Nitzan Staley General Atlantic LLC
Daughter of Aceco founders. New York-based
Wife of Barclays CEO Jes Staley. private-equity firm.
Received Received
$160 million $290 million
26% 48%
Photos: Bloomberg News; Regis Filho/Valor THE WALL STREET JOURNAL.
Jockeying for control of Staley didn’t agree to inter-
Aceco and its assets intensified cede, people familiar with the
last fall, after the company fell matter said. KKR executives
behind on payments affecting hoped Mr. Staley would get
$85 million in debt. An entity back to them. A person close to
now fully owned by Mr. Nitzan Mr. Staley said he viewed the
bought a slug of debt in the call as confrontational.
Aceco holding company that Soon afterward, Mr. Staley
was created as part of the 2014 suggested to a longtime friend,
deal—which could have allowed Timothy Collins of New York-
him, as a creditor, to regain based Ripplewood Advisors
control of Aceco. KKR was LLC, that he consider investing
taken by surprise, people famil- in Aceco. Mr. Staley described
iar with the events said, and Mr. Nitzan as a “good guy,” ac-
the company and Mr. Nitzan cording to people familiar with
are waging battle over owner- the conversation.
She said she analyzed five
years of data to come to her
finding about the higher rejec-
tion rate of code written by
els, starting at E3 and going up
to E10. When factoring in level,
the difference in rejection rates
based on gender “shows no sta-
women. The engineer, whose tistically significant difference,”
identity couldn’t be learned, wrote Mr. Parikh in the post.
pulled from Facebook’s open Experts and former employ-
repository of code-review ees say both studies had flaws.
data, which included details The first may not have taken
such as an engineer’s tenure at into account an engineer’s pre-
the company as well as his or vious experience before join-
her team, city and gender. ing Facebook, while the offi-
Women also waited 3.9%
longer to have their code ac-
cepted, and got 8.2% more
comments and questions, ac- CORRECTIONS 
cording to the analysis.
Questioned about the engi- AMPLIFICATIONS
neer’s report at a weekly Q&A
with employees, Mr. Zuckerberg
responded that gender bias was British wallpaper company
“an issue,” said one person who de Gournay was incorrectly
observed the exchange. described as French in a
The follow-up Facebook What’s News article about the
analysis, shared internally by company’s collaboration with
Mr. Parikh in October, played Italian shoe label Aquazzura in
down the gender gap, attribut- the May edition of WSJ. Maga-
ing the higher rejection rates zine. Also, de Gournay should
to an engineer’s level. Face- have received credit for the
book used confidential human- background image that ran
resources data such as an en- with the article. It was incor-
gineer’s rank; the first study rectly credited to photogra-
used the length of time an en- pher Mariam Medvedeva.
gineer worked at Facebook.
Readers can alert The Wall Street
Engineering roles at Face- Journal to any errors in news articles
book are broken into eight lev- by emailing wsjcontact@wsj.com.
said he considers the proposal
unfair. Mr. Joyner said both
women were clean when they
set their world records and
said “it’s really frustrating to
see how someone with a
stroke of a pen, can go change
history.”
“That’s dishonoring my
family,” he said. “I will fight
tooth and nail. I will find ev-
ery legal opportunity that I
can find. I will fight it like I
am training for an Olympic
gold medal.”
Ms. Koch and Ms. Kratoch-
vílová couldn’t be reached.
Several athletes criticized
the proposal. Paula Radcliffe
of Britain, the reigning world
record holder in the women’s
marathon, set her mark of
2:15:25 at the 2003 London
Marathon. In a lengthy post on
her Twitter account, she wrote
that the change would be con-
fusing to fans and took aim at
governing bodies’ inability to
eradicate dopers.
“Although we are moving
forward, I don’t believe we are
yet at the point where we have
a testing procedure capable of
catching every cheat out there,
so why reset at this point?”
she wrote. “Do we really be-
lieve a record set in 2015 is to-
tally clean and one set in 1995
not?”
In December, as Mr. Collins
explored such an investment,
he contacted KKR—and was
surprised when, through an
intermediary, KKR suggested
he steer clear, according to
some of the people familiar
with the talks.
With the ownership of
Aceco in dispute, KKR viewed
any deal involving Mr. Nitzan
and an outside ally as limiting
KKR’s legal options, people fa-
miliar with KKR’s thinking
said. Mr. Collins stayed away.
Meanwhile, KKR learned
that Mr. Staley, while traveling
on Barclays business, had dis-
cussed Aceco in private conver-
sations with two KKR co-inves-
tors, the Teacher Retirement
System of Texas and GIC, Sing-
apore’s sovereign-wealth fund,
according to people familiar
with the matter.
Answering questions from
senior executives at the funds,
Mr. Staley told them he was
standing by Mr. Nitzan, who
he didn’t believe would com-
mit fraud, people familiar with
the conversations said. Mr.
Staley’s view was that KKR
had bought a good company
but at a bad time. A person fa-
miliar with Mr. Staley’s think-
ing said that when the execu-
tives asked him about the
allegations about his brother-
in-law, he felt he should give
them honest answers.
GIC and the Texas pension
fund declined to comment.
After learning of these con-
versations, KKR executives dis-
cussed whether to call the Bar-
clays board to complain, a
person familiar with the mat-
ter said. Instead, in mid-March,
KKR’s Mr. Navab called Mr. Sta-
ley again.
Mr. Navab noted KKR hadn’t
heard from Mr. Staley after
their September call, yet Mr.
Staley had intervened on be-
half of Mr. Nitzan, people fa-
miliar with the call said. Mr.
Staley was vehement that he
would continue standing by his
family, the people said.
cial analysis failed to offer
enough data to conclusively
rule out gender bias.
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THE WALL STREET JOURNAL.
Pyongyang Protests U.S. Bomber Flyover
Complaint comes as
missile-defense system
is declared operational
in South Korea
BY JONATHAN CHENG
SEOUL—North Korea com-
plained about a flyover of a
pair of U.S. supersonic bomb-
ers, as the Central Intelligence
Agency’s director wrapped up
a three-day visit to South Ko-
rea and the U.S. declared a
missile-defense system that it
is installing in South Korea
operational.
The flurry of activity on the
Korean Peninsula underscores
U.S. President Donald Trump’s
continuing focus on North Ko-
rea as he seeks a way to con-
tain the threat from Pyong-
yang’s nuclear and missile
programs.
Tuesday’s developments
came a day after Mr. Trump
said he would be “honored” to
meet with North Korean
leader Kim Jong Un.
On Monday, the U.S. Air
Force flew two B-1B Lancer su-
personic bombers over the Ko-
rean Peninsula with the South
Korean air force, said Lt. Col.
Lori Hodge, a spokeswoman
for the U.S. Pacific Air Force
Command.
North Korea’s state media
lashed out on Tuesday at the
flight, complaining that it was
taking place “when Trump and
other U.S. warmongers are
crying out for making a pre-
emptive nuclear strike at the
DPRK,” using an acronym for
the country’s official name,
the Democratic People’s Re-
U.S.Stands
By Duterte
OfferAmid
Criticism
BY FELICIA SCHWARTZ
WASHINGTON—The White
House on Monday tried to bat
away criticism of President
Donald Trump’s decision to in-
vite the Philippines’ President
Rodrigo Duterte to Washington.
White House press secretary
Sean Spicer said Mr. Trump
sees the invitation to Mr. Du-
terte—who has waged a brutal
and deadly antidrug campaign
since he took office last year—
as part of the Trump adminis-
tration’s efforts to enlist coun-
tries in the region to further
diplomatically and economi-
The Philippines’
leader has been
waging a brutal
antidrug campaign.
cally isolate North Korea.
“The national interests of
the United States, the safety of
our people and the safety of
people in the region are the
No. 1 priorities of the presi-
dent,” Mr. Spicer said Monday.
Mr. Trump extended the in-
vitation in a call Saturday,
which the White House de-
scribed as “very friendly.”
A spokesman for Mr. Du-
terte said in a press briefing
on Tuesday that Mr. Trump
had praised the Philippine
president during their phone
call, according to local media.
Rights groups and lawmak-
ers strongly criticized the invi-
tation, pointing to Mr. Du-
terte’s bloody antinarcotics
campaign that has killed more
than 8,000 people.
Sen. Ben Cardin (D., Md.),
the senior Democrat on the
Senate Foreign Relations Com-
mittee, slammed Mr. Trump’s
decision to open the White
House to “a man who has
boasted publicly about killing
his own citizens.”
Sen. Chris Coons (D., Del.)
said welcoming Mr. Duterte to
the White House “risks giving
Duterte’s actions and his bru-
tal human rights violations an
American stamp of approval.”
The White House said Mr.
Trump wants to build a rela-
tionship with Mr. Duterte to
“make sure our people are
protected” and try to pressure
North Korea to abandon its
nuclear program.
A U.S. strategic B-1B bomber engaging in a joint drill with South Korean jet fighters over the Korean Peninsula in March.
public of Korea.
“The reckless military prov-
ocation is pushing the situa-
tion on the Korean Peninsula
closer to the brink of nuclear
war,” Pyongyang’s Korean Cen-
tral News Agency said. It
added that the North Korean
military “is keenly watching
the military movement of the
U.S. imperialists,” and could
respond with nuclear arms, re-
peating a frequent threat
made in North Korea’s media.
Col. Hodge said the bomber
Trump’s Tax Plan Sparks Concern in China
BY TREFOR MOSS
SHANGHAI—U.S. President
Donald Trump’s plan to slash
business taxes is having a
domino effect on China, a ma-
jor American economic com-
petitor.
Like Mr. Trump, many Chi-
nese executives say corporate
taxes are too high, with some
calling them the “death tax.”
“We pay a lot to feed the
civil servants,” said Zhou De-
wen, director of the Zhejiang
Private Investment Enterprise
Association, a business lobby-
ing group.
China has tried for years to
reduce business costs. Now,
Chinese officials and execu-
tives worry that the tax pro-
posal Mr. Trump announced
last week will set back China’s
global competitiveness and
spur companies to invest in
America instead of China.
In anticipation of the U.S. tax
move, the State Council, China’s
cabinet, said in April that the
government would reduce cor-
porate taxes by more than $55
billion to “improve business
conditions.” The Communist
Party’s newspaper, People’s
Daily, warned on Friday that the
new U.S. plan could trigger a
“tax war” if countries start com-
peting to offer the lowest rates.
Despite China’s reputation
as an export and manufactur-
ing juggernaut, rising labor
and land costs and slowing
Volcano in North Sumatra, Indonesia, Spews Fire and Ash Into the Night
FORCE OF NATURE: Mount Sinabung, seen here from Beganding village in the Karo Regency, expelled glowing ash on Tuesday. It has been active for several years.
WORLD NEWS
missions “are not related to
any specific situation or na-
tion,” and that the U.S. mili-
tary has maintained a bomber
presence in the region since
2004.
“The U.S. conducts continu-
ous bomber presence opera-
tions as part of a routine, for-
ward deployed capability
supporting regional security
and our allies in the Indo-Asia-
Pacific region,” Col. Hodge
said.
The exchange over the fly-
An assembly line operates at a Fuyao Glass plant in Moraine, Ohio.
economic growth are eroding
its edge. Officials and busi-
nesses see lowering taxes as
key to countering that trend.
“China is losing its competi-
tive advantage,” said Liu Huan,
a professor at the Central Uni-
versity of Finance and Econom-
ics and an adviser to the State
Council. “There is no dispute
now that Chinese companies’
tax burdens are relatively large.”
While U.S. companies pay a
higher national income-tax
rate—35%, compared with 25%
in China—Chinese companies
face a welter of other taxes
and fees their U.S. counter-
parts don’t, including a 17%
value-added tax. And while
Chinese firms don’t pay state
taxes, as U.S. companies do,
Chinese employers pay far
higher payroll taxes. Welfare
and social-insurance taxes cost
Wednesday, May 3, 2017 | A3
Korea, Terminal High-Altitude
Area Defense, or Thaad, opera-
tional, stirring controversy a
week before a South Korean
election that is expected to
vote into office a presidential
candidate who has called for
an immediate halt to the mis-
sile battery’s deployment.
Thaad is “operational and
has the ability to intercept
North Korean missiles and de-
fend the Republic of Korea,”
USFK said.
The speedy deployment of
the missile-defense system
comes days after a series of
statements from senior White
SOUTH KOREAN AIR FORCE/EUROPEAN PRESSPHOTO AGENCY
House officials about whether
South Korea should pay for
the $1 billion Lockheed Martin
Corp. battery, upending expec-
tations in Seoul about the sta-
tus of an agreement last year
that said the U.S. would pay
for it.
It also comes in the midst of
a snap election that looks set to
elevate to the presidency Moon
Jae-in, a candidate who has
called for more distance from
Washington and an immediate
halt to the deployment of
Thaad. Mr. Moon says any deci-
sion on deploying Thaad should
over came as CIA Director said U.S. Forces Korea, which be made by the next South Ko-
Mike Pompeo wrapped up a oversees the military’s combat rean administration, in consul-
three-day visit to South Korea, forces in South Korea. tation with the public.
where he toured Yeonpyeong Mr. Pompeo also met with China also opposes the
Island, the site of the most re- South Korea’s top spy chief. Thaad system. At a regular
cent serious military engage- The CIA chief’s visit was the press briefing on Tuesday, for-
ment between the two Koreas, fourth high-level trip to South eign ministry spokesman Geng
in November 2010. Korea this year, following Shuang repeated calls for an
During the visit to Yeon- tours by Secretary of Defense immediate halt to the deploy-
pyeong Island and the dis- Jim Mattis, Secretary of State ment of the Thaad battery,
puted inter-Korean waters Rex Tillerson and Vice Presi- pledging to take any necessary
around the island, Mr. Pompeo dent Mike Pence. measures to protect Beijing’s
was able to “gain a firsthand Earlier Tuesday, USFK de- interests.
appreciation of the North Ko- clared the missile-defense sys- —Gordon Lubold
rean threat to South Korea,” tem it is installing in South contributed to this article.
ing the income-tax rate to 15%.
Many Chinese companies
raine, Ohio, rather than start a
new plant in China. Mr. Cho
also use government incen- and Fuyao didn’t respond to
JOSHUA A. BICKEL FOR THE WALL STREET JOURNAL
tives to limit their outlays, tax requests to comment.
experts say. Some, especially Beijing officials say Fuyao’s
state-owned enterprises, fur-
ther benefit from easy access
to cheap capital, a subsidy
American gambit could be just
the beginning if U.S. tax rates
drop drastically. Mr. Liu, the
that helps offset tax demands. tax-policy expert, said Beijing
But Beijing is even squeez- is serious about lowering taxes,
ing state companies as eco- but can’t act too quickly be-
nomic growth and tax revenue cause changes take time—and
slow. In recent months, Beijing because it needs the revenue.
has imposed capital controls, For China’s legions of
blocking proposed overseas in- smaller manufacturers, Mr.
vestments by Chinese compa- Cho’s blunt comments about
nies that it deemed nonstrate- excessive taxation were a wel-
gic and potentially making it come intervention. Smaller, pri-
between 40% and 100% of a harder for Chinese firms to vate businesses provide most
paycheck in China. take advantage of lower tax of the jobs, but struggle to get
World Bank figures for 2016 rates in foreign jurisdictions. access to tax breaks and lower
show that total tax burden on With costs rising and profit interest loans, which generally
Chinese businesses are among margins shrinking, companies go to larger state-owned com-
the highest of major econo- complain that a high tax burden panies and tech firms.
mies: 68% of profit, compared is harder to bear. “It’s like a per- In a November survey con-
with 44% in the U.S. and 40.6% son who used to be able to carry ducted by the Beijing-based
on average world-wide. The a heavy load on his shoulder: Unirule Institute of Economics,
figures include national and lo- When he gets sick he just can’t 87% of the 113 private compa-
cal income taxes, value-added shoulder the same pressure any- nies polled said their tax bur-
or sales taxes, and any manda- more,” said He Jun, an econo- den was either very high or
tory employer contributions mist at Beijing Anbound Infor- relatively high.
for welfare and social security. mation Co., a private think tank. The overall tax burden “is a
In practice, tax experts say, Chinese auto-glass maker crisis for enterprises,” said Mr.
Chinese companies typically Fuyao Glass Industry Group Zhou of the Zhejiang private
pay taxes on about 40% to 50% recently crystallized the con- business association, which
of their profit after various cerns of some businesses and represents more than 100 pri-
deductions. Tax experts say officials. In an interview late vate companies in eastern
the average U.S. rate after de- last year with China Business China. “I’ve heard a lot of com-
ductions is lower than that, News, its chairman, Cho Tak plaints from small to medium-
though a precise estimate Wong, cited excessive taxation size enterprises. It’s really very
wasn’t available, and will fall as a reason for investing $1 difficult for them to survive.”
even further if Mr. Trump ful- billion to revive a former Gen- —Liyan Qi in Beijing
fills his aim of more than halv- eral Motors factory in Mo- contributed to this article.
TIBTA PANGIN/AGENCE FRANCE-PRESSE/GETTY IMAGES
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
A4 | Wednesday, May 3, 2017
Le Pen Uses Rival’s Words in Campaign
BY MAX COLCHESTER
AND STACY MEICHTRY
PARIS—Marine Le Pen’s ef-
forts to broaden her voter
base took an unusual turn
Tuesday when the far-right
candidate’s campaign admitted
she lifted sections of a speech
mainstream conservative
François Fillon delivered be-
fore getting knocked out of
the race.
In kicking off the final week
of her presidential campaign
before a packed convention
center on Monday, Ms. Le Pen
had used a “beautiful passage”
from an address Mr. Fillon de-
livered in mid-April, her cam-
paign manager David Rachline
said Tuesday.
“This wink, I believe, was
appreciated, including by all
voters of François Fillon,” Mr.
Rachline said. But an official
of Mr. Fillon’s party, Les Ré-
publicains, said the unattrib-
uted use of the former candi-
date’s words was an
“outrageous attempt to steal
our voters.”
The borrowed verbiage was
a measure of how Ms. Le Pen
is straining to broaden her ap-
peal beyond the National
Front’s anti-immigrant base as
she seeks to narrow the gap
with Emmanuel Macron, the
pro-Europe candidate who
polls say is ahead of her by
60% to 40%.
Mr. Fillon was narrowly
beaten in the first round of
voting after he was forced to
apologize for a public expense
scandal involving his wife and
children.
EU Won’t
Retaliate
Over U.S.
Visa Policy
BY VALENTINA POP
BRUSSELS—The European
Union won’t impose visas on
American travelers in retalia-
tion for the U.S. continuing to
exclude five EU countries from
its no-visa regime, the bloc’s
executive branch said Tuesday.
Imposing visas, as re-
quested by the European Par-
liament in March, would be
“counterproductive” and scut-
tle diplomatic efforts with the
Trump administration to ex-
pand the Visa Waiver Pro-
gram, said European migration
commissioner Dimitris Avram-
opoulos.
EU lawmakers in March
made a nonbinding request for
the European Commission, the
EU’s executive body, to retali-
ate after a deadline expired
last year for bringing Poland,
Croatia, Romania, Bulgaria and
Cyprus within the U.S. visa-
free travel regime.
“The EU will always choose
engagement, commitment and
patient diplomacy over any
form of unilateral retaliation—
because this is in the mutual
interest of both EU citizens, as
well as the citizens of the
U.S.,” Mr. Avramopoulos said.
He noted that similar diplo-
matic efforts with Canada had
yielded results. As of Monday,
Canada lifted its visa require-
ments for Bulgarian and Ro-
manian citizens who held a
Canadian visa in the past 10
years and plans to lift all visa
restrictions for these two
countries on Dec. 1.
“We have been working
hard in the past months with
the five affected member
states and our U.S. counter-
parts to launch a more result-
oriented process, which would
bring those member states
closer to meet all U.S. Visa
Waiver Program require-
ments,” Mr. Avramopoulos
said. The commission will re-
port back on where things
stand in December, he added.
Under EU visa-reciprocity
rules, countries allowed visa-
free travel to the EU must re-
ciprocate the no-visa regime
to all EU countries. However,
the U.S. Visa Waiver program
is based on a country-by-coun-
try analysis of several criteria
ranging from security to visa
overstays. The five newest EU
members didn’t make the cut,
mainly due to an above-aver-
age rate of people overstaying
or being denied visas.
Australia and Japan have
also granted visa-free travel to
all EU citizens over the past
two years.
Marine Le Pen, the National Front candidate for the 2017 presidential election, speaking during an interview in Paris on Tuesday.
Still, he managed to garner
20% of the vote of the first-
round vote by running as a
law-and-order candidate un-
afraid to publicly embrace his
Roman Catholicism in a coun-
try where the separation of
church and state is strictly en-
forced. That made Mr. Fillon
popular with voters who view
the country’s Christian heri-
tage as a bulwark of national
identity, buffeted by waves of
migrants from the Middle East
and terror attacks that have
Decline in Eurozone Unemployment Slows
BY PAUL HANNON
The decline in the number
of people without jobs across
the eurozone was the smallest
in almost a year during March,
a development that is likely to
inspire caution among policy
makers at the European Cen-
tral Bank.
The number of unemployed
workers fell by just 5,000 dur-
ing the month, the smallest
decline since a 3,000 drop in
April 2016, the European
Union’s statistics agency said
on Tuesday. The drop left the
unemployment rate unchanged
at 9.5%, down from 10.2% a
year earlier, but more than
twice the U.S. equivalent.
The number of people with-
out work fell by 123,000 in
February, and 39,000 in Janu-
DEBT
Continued from page A1
concessions on Greece’s debt.
Tuesday’s agreement, which
comes after months of re-
newed brinkmanship over how
much new austerity Greece is
willing to accept, will release a
payment of around €7 billion,
without which Greece would
be insolvent by July.
The deal will go to the
Greek parliament in mid-May,
government spokesman Dimi-
tris Tzanakopoulos said. It
would require the support of
the German government,
which indicated the agreement
is important but not yet suffi-
cient for Berlin to agree on
debt-relief measures.
“The agreement between
Greece and the institutions on
further reform measures is an
important step forward,” the
German Finance Ministry said.
It stressed that the second re-
view on the bailout program
isn’t yet complete.
The deal could ease another
headache for the EU, which
has been dogged by a series of
challenges. It comes as confi-
dence in the bloc is slowly re-
turning, as nationalist move-
ments threatening the
prospects of the eurozone ap-
pear to be receding and the re-
gion’s economy finally recov-
ers after a long and painful
downturn.
“It is now for all partners to
reach an understanding on the
question of Greece’s debt in
the coming weeks,” said Pierre
Moscovici, the EU’s economics
commissioner. “With this
agreement, we need now to
write a new story of stability,
jobs and growth for Greece
and for the euro area as a
whole.”
The agreement sets the con-
ditions for talks, possibly by
the end of May, with creditors
on a deal to lengthen the ma-
HK JP KO ML SI IN UK
WORLD NEWS
killed more than 200 people in
recent years.
At the same time, Mr. Fil-
lon’s pro-Europe stance made
him a more moderate choice
for voters nervous about Ms.
Le Pen’s proposals to resurrect
France’s borders with its Euro-
pean Union neighbors and
ditch the bloc’s common cur-
rency.
Mr. Fillon’s following is par-
ticularly strong among prac-
ticing Catholics, who account
for about 15% of France’s vot-
ary. The smaller drop in March
was largely due to a 41,000 in-
crease in the number of job-
less Italians offsetting declines
elsewhere, although the
French jobless total edged up.
If sustained, the slowdown
would likely reinforce the
ECB’s caution as it faces pres-
sure from German politicians
to begin to wind down its
stimulus programs.
“March’s small fall in the
level of eurozone unemploy-
ment came as something of a
disappointment and suggests
that, despite the growing
strength of the economy, wage
growth will remain subdued
and keep a lid on inflation,”
said Jessica Hinds, an analyst
at Capital Economics.
In recent months, the ECB
has stressed the importance of
turity and lower payments on
Greece’s debt.
If the debt becomes more
sustainable, the European Cen-
tral Bank could decide to in-
clude Greece in its bond-buy-
ing program, effectively
clearing the way for Athens to
return to capital markets for
financing. It has been shut out
of international bond markets
Healing Greece's Battered Economy
Tuesday's bailout deal could lure international investors back
to Greece and support a gradual economic recovery.
GDP, change from a year earlier
10%
5 gets for many years.
0 make up 45% of all lending,
–5
–10
2004
Unemployment rate
30%
25
20
15
10
5 the country’s banks in the first
0 The economy contracted
2004 ’10
10-year government bond yields*
20%
15
10
5 Greece
0 Ireland
2012
*Through Friday Sources: Greek statistics service, Elstat
(GDP, unemployment); Tradeweb (bond yields)
FR MN PR
ing base, said Jerome Four-
quet, director of polling firm
IFOP. In last month’s first
round, Mr. Fillon was backed
by 44% of the voters who at-
tend Catholic Mass at least
once a month, far surpassing
Mr. Macron and Ms. Le Pen,
who each garnered 16% of
those voters, according to a
Harris Interactive poll.
Mr. Fillon’s first-round loss
has left many of his support-
ers in a bind. He has pledged
to vote for Mr. Macron to
A steelworks employee cleans equipment in Salzgitter, Germany.
rising wages to keeping the in-
flation rate at its target of just
below 2% over coming years.
The central bank’s governing
since 2010, except for a brief
window in 2014.
Other EU countries that
needed bailouts, such as Ire-
land, Portugal and Cyprus,
have long since returned to
capital markets.
Under ECB rules, the central
bank would purchase no more
than €3 billion of Greek bonds.
However, “if the country be-
’10
Portugal
THE WALL STREET JOURNAL.
THE WALL STREET JOURNAL.
identity of this country was
built,” said Christophe Billan,
leader of Sens Commun, a
grass-roots movement of Cath-
olics and other people who
took to French streets after
gay marriage was legalized.
In endorsing Mr. Fillon, Mr.
Billan threw Sens Commun’s
vast network behind him. But
he is so far unwilling to do the
same for Ms. Le Pen, dismissing
her attempts to portray herself
as the face of French conserva-
tism as “pure marketing.”
In the original speech, Mr.
Fillon called on France to
forge a national identity that
rejects totalitarianism and ma-
terialism.
“France, I’ve said, is one
history, one geography, but it’s
also a sum of values and prin-
ciples transmitted from gener-
CHARLES PLATIAU/REUTERS
ation to generation like pass-
words,” Mr. Fillon said.
On Monday, Ms. Le Pen
stuck a similar note. “France,
it’s also a sum of values and
principles transmitted from
generation to generation, like
passwords,” she said.
The hierarchy of the Catho-
block Ms. Le Pen’s path to lic Church has tried to keep
power. But some voters who out of the election. Asked
rallied behind Mr. Fillon, in about the race last week, Pope
part for his opposition to Francis said: “I know that one
France’s legalization of gay- represents the far-right, but
marriage in 2012, are finding the other I don’t know where
it hard to cast votes for the he comes from, so I can’t give
socially liberal Mr. Macron. my opinion on France.”
“They don’t want to back Rev. Marc Boulle, a priest in
the National Front, but they the Catholic stronghold of
don’t agree with Mr. Macron,” Versailles just west of Paris,
says Mr. Fourquet, the poll- said parishioners have been
ster. meeting to weigh their deci-
Mr. Macron “shatters the sion. “Each one has their own
foundations on which the conscience,” he said.
Surveys of manufacturing
companies around the euro-
zone that were released on
Tuesday suggest unemploy-
ment will continue to fall over
coming months. In response to
data firm IHS Markit, manufac-
turers reported that they hired
new workers at the fastest rate
MORRIS MACMATZEN/GETTY IMAGES
in six years.
“Production, order books
and exports all grew at the
fastest rates for six years, fuel-
ing one of the largest increases
in factory jobs in the 20-year
history of the survey,” said
Chris Williamson, IHS Markit’s
chief business economist.
Economists expect figures to
be released on Wednesday will
council left policy unchanged show eurozone gross domestic
last Thursday, and gave no product increased at a quarter-
signs it was ready to wind to-quarter pace of 0.5% in the
down its monetary stimulus. first three months of the year.
comes eligible, borrowing
costs will go down, Greece will
regain access to markets and
attract international investors’
as much as half since the start
of the crisis. There are also op-
portunities in tourism, which
will likely see a record year in
interest, a substantial factor in Greece in 2017.
re-engineering growth,” says “The time is now and the
Nikos Karamouzis, president of time is right,” says John Koud-
Hellenic Bank Association and ounis, a leading investor in
Greece’s lender Eurobank. Greek-American consortium
Enormous obstacles remain. EXIN. “The Greek economy is
Because of Greece’s serious close to bottom, if not [at]
problems, the International bottom, and will turn around.
Monetary Fund doesn’t expect It’s not going to happen over-
the country to grow more than night.” EXIN and Chinese con-
1% in the long term. glomerate Fosun are the two
The insistence by Greece’s front-runners to buy a major-
creditors on large budget sur- ity stake in a large insurance
pluses means the government, fund.
whose debt is 179% of GDP, will “Investor appetite is rising,”
live with extremely tight bud- says Andreas Andreadis, head
of the Greek tourism confeder-
Greek banks are immersed ation. “Small businesses could
in nonperforming loans, which finally access lending by
banks, which were either ex-
contributing to a steady con- cessively strict or didn’t have
traction in private credit since the tools to manage the bad
late 2010. And officials pri- loan problem.”
vately don’t expect a wholesale Tuesday’s deal also includes
solution to that problem soon. measures aimed at rendering
The Greek economy has the economy more competi-
paid a heavy price for the de- tive, including legislation to
lay in debt talks and the tussle encourage out-of-court settle-
with international creditors ment for companies to work
over the next bailout payment. out their debts to banks, tax
International investors inter- authorities and suppliers.
ested in Greek assets last If the ECB includes Greek
spring decided against it. sovereign debt in its bond-
Meanwhile, Greeks withdrew buying program, Athens could
€2.3 billion in deposits from expect to sell bonds with an
interest rate of about 4%, ac-
two months of the year. cording to some experts. While
that is higher than the 1% it
1.2% in the fourth quarter of now pays for bailout funds, a
2016, halting the gradual de- return to capital markets by
cline in Greece’s sky-high un- the government would trickle
employment rate and pushing down by helping lower the
lending down 6.6% in February, rates banks and companies
according to UBS. Economists now pay to issue bonds.
now expect gross domestic It could also ease access to
product to grow 1.5% this year, capital markets for the many
down from a 2.7% forecast late companies currently shut out
2016. of bond markets. A handful of
Bankers say interest from export-oriented firms such as
foreign investors could return oil refiner Motor Oil and gam-
now. Distressed-debt investors ing company OPAP have issued
are eyeing packages of bad five-year bonds with coupons
loans, they say, while there has of about 3.5%, but small com-
been interest in Greek real es- panies struggle to secure any
tate, whose prices are down by financing at all.
 For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
THE WALL STREET JOURNAL.
Putin Denies
Russia Meddles
In Foreign Races
BY NATHAN HODGE
MOSCOW—Russian Presi-
dent Vladimir Putin said his
government didn’t meddle in
the politics of other countries,
dismissing allegations of inter-
ference in the 2016 U.S. presi-
dential election as “simply ru-
mors.”
In a press conference Tues-
day with German Chancellor
Angela Merkel, Mr. Putin also
denied any intent to interfere
in coming elections in Europe.
“Seeing all the pernicious-
ness and futility of such ef-
forts, it never occurred to us
to interfere in the political
processes of other countries,”
Mr. Putin said in response to a
question about what U.S. intel-
ligence officials have de-
scribed as a campaign of hack-
ing and disinformation.
Russian interference in the
American election “has not
been confirmed by anyone and
has in no way been proven, it’s
simply rumors used in domes-
tic political infighting in
America,” Mr. Putin added.
The German and Russian
leaders met in the Black Sea
resort city of Sochi amid con-
tinued friction between the
Kremlin and the West over
Middle East policy and the cri-
sis in Ukraine.
Relations between the Krem-
lin and the West have remained
at rock bottom since Russia’s
annexation of Crimea from
Ukraine in 2014 and the impo-
sition of Western sanctions on
Moscow. Russia’s military in-
tervention in Syria has also
sharpened confrontation with
the U.S. and its European allies.
President Donald Trump
spoke by phone on Tuesday
with Mr. Putin, the White
House and the Kremlin said,
weeks after the U.S. leader de-
WORLD WATCH
VENEZUELA
Maduro Is Seeking
A New Constitution
President Nicolás Maduro
signed an order to convene a
special assembly to redraft the
constitution, the latest in a
string of efforts to retain power
in the face of mounting protests
and civil unrest.
Mr. Maduro called for a
vote—though it remained unclear
among whom—to elect a so-
called constituent assembly that
would in theory become the na-
tion’s highest authority.
The opposition responded by
pledging to intensify antigovern-
ment demonstrations to protest
what they said was the leftist
leader’s latest attempt to violate
democratic order and avoid elec-
tions that polls show his ruling
Socialist Party would over-
whelmingly lose. In Caracas, resi-
dents blocked streets with bro-
ken concrete, twisted metal and
flaming piles of trash.
Mr. Maduro said a constitu-
ent assembly would ease Vene-
zuela’s crippling economic crisis,
guarantee peace and beat back
what he alleges are efforts to
destabilize his administration,
without explaining in detail how.
—Kejal Vyas
SAUDI ARABIA
Deputy Crown Prince
Defends State Perks
The country’s powerful dep-
uty crown prince defended his
government’s decision to reverse
the contentious austerity pro-
gram by reinstating perks for
state employees, but cautioned
more belt-tightening could follow
if oil prices dropped.
Prince Mohammed bin Sal-
man, the second-in-line to the
throne, was speaking in a rare
ABIR SULTAN/EUROPEAN PRESSPHOTO AGENCY
FLYOVER: Israel marks Independence Day with a display of force.
scribed relations between
Washington and Moscow as
reaching an all-time low.
The Kremlin said Messrs.
Trump and Putin held a “busi-
nesslike and constructive”
conversation that included the
crises in Syria and on the Ko-
rean Peninsula.
In a meeting with Mr. Putin
on Russian soil in 2015, Ms.
Merkel took a combative
stance, chiding her counter-
part over what she called the
“criminal and illegal annexa-
tion of Crimea.”
This week, the German
chancellor raised another sen-
sitive issue for the Kremlin:
Reports of the detention,
abuse and disappearance of
gay men in the Russia’s Mus-
lim-majority republic of
Chechnya.
France and Germany have
national elections this year,
and European leaders have
been unsettled by what they
see as Russian attempts to in-
terfere through propaganda
and cyberattacks. This year,
German Finance Minister
Wolfgang Schäuble told The
Wall Street Journal that Rus-
sia was waging “a propaganda
war” ahead of Germany’s gen-
eral election.
Speaking on Tuesday in the
same press conference as Mr.
Putin, Ms. Merkel said the Ger-
man government would deal
with “gross disinformation,”
and referred to a distorted
news story early last year that
caused a furor in Russian-lan-
guage media, sparking anti-mi-
grant protests.
But she also played down
fears of Russian interference
and “hybrid warfare”—short-
hand for Russia’s use of infor-
mation warfare in tandem
with political or military con-
frontation.
televised interview that aired on
Tuesday. The 31-year-old royal is
the driving force behind the am-
bitious plan for economic change
unveiled a year ago aimed at
ending the kingdom’s depen-
dence on oil revenue.
A year on, the Saudi monar-
chy is under growing pressure to
show that its plan is working.
The slump in oil prices that
began in 2014 forced the gov-
ernment to cut public spending
and to fundamentally rethink the
country’s economic model. The
austerity measures introduced
so far have succeeded in reduc-
ing the kingdom’s budget deficit
to around $79 billion last year
from a record $98 billion in
2015.
—Summer Said
and Margherita Stancati
JORDAN
Anglican Archbishop
Visits Iraqi Refugees
The head of the Anglican
Church met with Iraqi refugees
during a visit to the Hashemite
Kingdom in which he called on
the region’s embattled Christians
to remain in the Middle East,
the cradle of their faith.
Archbishop of Canterbury
Justin Welby said Christians “are
the past in the Middle East, they
are the present and they must
be the future.”
Two dozen refugees from
Iraq asked the archbishop to
help them leave the Middle East
after praying with him at the
Anglican church of St. Paul in
Amman. The cleric also met Jor-
dan’s King Abdullah II and visited
the Zaatari refugee camp.
The Middle East is home to
the oldest Christian communities
in the world, but large numbers
of Christians have fled in recent
years to escape war and Islamic
extremism. —Associated Press
WORLD NEWS
Hamas leaders Yahya Sinwar, left, and Sheikh Ismail Haniyeh listen to the announcement of a new Hamas policy document Monday.
Palestinians Call for Unity
BY RORY JONES
TEL AVIV—Palestinian offi-
cials in the West Bank urged
Hamas to take concrete steps
to reconcile with the Palestin-
ian Authority, a day after the
Islamist movement issued a
revised set of principles in
which it dropped its long-
standing call for the destruc-
tion of Israel.
In a six-page document is-
sued just days before Mah-
moud Abbas, head of the Pal-
estinian Authority, is to meet
with President Donald Trump
at the White House, Hamas
also approved the establish-
ment of a Palestinian state
based on pre-1967 borders,
aligning it with the Authority’s
longstanding position.
In bridging some differ-
ences with the Authority, the
document “takes away this Is-
raeli accusation that Palestin-
ians are divided,” a Palestinian
official said in Ramallah, the
Authority’s governing seat.
“It’s a good step. It’s whether
they will implement it or not.”
The document, unveiled
Monday in the Qatar capital
Doha, allows Mr. Abbas to dis-
IMF Urges Oil States to Diversify
BY NIKHIL LOHADE
DUBAI—The sharing of oil
wealth through government
jobs and lavish subsidies is no
longer sustainable for Saudi
Arabia and its neighbors in the
Middle East, the International
Monetary Fund said, urging
the countries to focus on roll-
ing out ambitious diversifica-
tion plans.
“The challenge, therefore, is
to develop a new model of
economic growth that is both
resilient and inclusive,” the
IMF said in its latest outlook
report for the Middle East,
North Africa, Afghanistan and
Pakistan. “In particular, there
is a need to reduce the depen-
dence on oil and generate pri-
vate-sector jobs for the rapidly
growing labor force.”
In recent years, Saudi Ara-
bia and several other Gulf
states cut spending to cope
with a sharp drop in oil in-
come, which accounts for a
major portion of government
revenue. Saudi Arabia, for in-
stance, canceled bonus pay-
ments and curbed allowances
for state employees in Sep-
tember, months after cutting
subsidies for fuel, electricity
and water.
But in a surprise move late
last month, King Salman rein-
stated allowances and bonuses
for state employees, citing an
increase in revenue and a de-
cline in the kingdom’s budget
deficit.
Members of Saudi Arabia’s
working middle class—a ma-
jority of whom are employed
by government-related entities
and accustomed to generous
state assistance—had become
more conscious about their
spending in recent months.
Usually reluctant to grumble
about economic hardships,
many Saudi nationals criti-
cized the reduction in public
welfare, especially as the cuts
didn’t appear to affect the
wealthy.
The restoration of allow-
ances and bonuses to state
employees is expected to bol-
play a united Palestinian front
when he meets the U.S. presi-
dent, Palestinian officials said.
Israel has repeatedly high-
lighted the division between
Hamas and the Palestinian Au-
thority as proof that it doesn’t
have a Palestinian partner for
peace. Hamas rules the Gaza
Strip while the Palestinian Au-
thority, which is dominated by
Mr. Abbas’s more-secular Fa-
tah movement, governs the
West Bank.
Israel rejected suggestions
that the document, a supple-
ment to the group’s 1988 char-
ter, was anything more than a
rhetorical makeover that dis-
guised the determination of
Hamas to annihilate Israel.
“They dig terror tunnels
and have launched thousands
upon thousands of missiles at
Israeli civilians,” said David
Keyes, a spokesman for Prime
Minister Benjamin Netanyahu.
“This is the real Hamas.”
Daniel Shapiro, who served
as U.S. ambassador to Israel
during the Obama administra-
tion, suggested that nothing
essential about Hamas had
changed. The group has been
designated a terrorist organi-
The King Abdullah Financial District, north of Riyadh, shown under construction in early March.
ster consumer spending and
help revive growth in the king-
dom. It will also help calm
nerves as Saudi Arabia contin-
ues to spend billions abroad,
including on a costly and un-
popular war in Yemen.
Like many countries in the
Middle East and North Africa
region, Saudi Arabia unveiled
last year an ambitious plan to
reshape its oil-dependent
economy, known as Saudi Vi-
sion 2030. The overhaul is be-
ing led by Deputy Crown
Prince Mohammed bin Salman,
one of King Salman’s sons and
a possible successor.
As those austerity measures
took effect, Saudi Arabia’s
budget deficit shrank last year
to about $79 billion from a re-
cord $98 billion in 2015. Saudi
Arabia expects to run a deficit
of about $53 billion in 2017.
The impact of the resump-
tion of perks to state employ-
ees and the kingdom’s plans to
balance its finances by 2020
wasn’t immediately clear.
Jihad Azour, director for
the IMF’s Middle East and
Wednesday, May 3, 2017 | A5
zation by the U.S. and other
Western governments.
“It may serve some purpose
on the Palestinian or Arab
side, but it isn’t fooling any-
one on the Israeli or American
side,” said Mr. Shapiro, now a
senior fellow at Tel Aviv’s In-
stitute for National Security
Studies.
Arab nations and Turkey
were likely to withhold com-
ment until after the White
House meeting between Mr.
Trump and Mr. Abbas, the Pal-
estinian official said.
In recent weeks, Mr. Abbas
has put financial pressure on
Hamas in an apparent attempt
to show Mr. Trump that he un-
derstands the importance of
bringing some semblance of
unity to Palestinian govern-
ment and politics.
“If Abbas is smart enough,
he can use [the document of
principles] to show that every-
one is under his umbrella,”
said Mahdi Abdul Hadi, head
of the Jerusalem-based Pales-
tinian Academic Society for
the Study of International Af-
fairs.
The “Document of General
Principles and Policies” also
Central Asia Department, told
reporters on Tuesday that
some fine-tuning of measures
is allowed from time to time,
given the magnitude of adjust-
ments made and planned to
reduce the Saudi deficit to al-
most zero. He noted that the
Saudi government has said it
remains committed to achiev-
ing a balanced budget by
2020. An IMF mission is in
Saudi Arabia this month to re-
view the kingdom’s economy.
“Countries need to maintain
their focus on implementing
their economic diversification
plans—and the supporting
structural reforms—to
strengthen economic resilience,”
the IMF said in the report.
They should prioritize
growth-friendly measures such
as further energy-price re-
forms, additional cuts to cur-
rent spending and measures to
increase revenues, including
via improved tax administra-
tion, the IMF added.
The IMF expects Saudi Ara-
bia, the largest economy in the
Middle East, to grow 0.4% this
MOHAMMED SABER/EUROPEAN PRESSPHOTO AGENCY
more explicitly defines Hamas
as a national movement to
create a Palestinian state, dis-
tancing it from the Muslim
Brotherhood, which has
branches in Egypt and across
the region.
Until Monday, Hamas had
rejected the notion of a Pales-
tinian state within 1967 bor-
ders, a longstanding position
of the Palestinian Authority
and the Palestine Liberation
Organization, which Israel of-
ficially recognized in 1993 as
the representative of the Pal-
estinian people.
Hamas head Khaled
Mashaal said at Monday
night’s announcement in Doha
that Hamas was willing to en-
ter negotiations with Israel.
But the document of principles
doesn’t recognize the state of
Israel and indicates that in
time, Hamas will control all of
what is now Israel.
An Israeli official said
Hamas’s approach remained
different from the Authority’s.
“Instead of trying to de-
stroy us in one go, they will do
it in two goes,” the official
said. The charter is “cosmetics
and nothing more.”
FAISAL AL NASSER/REUTERS
year and 1.3% in 2018, down
from its January estimate of
2.3% for next year, because of
lower oil production and the
continuing austerity drive in
the kingdom.
This slip in growth is ex-
pected for most energy-selling
countries in the region, the
IMF added, after Saudi Arabia
last year agreed with other
major crude exporters to cut
production in an effort to lift
prices. The production cuts
have helped oil prices stabilize
in recent months after they
fell by about half since the
middle of 2014. Saudi Arabia
expects that agreement to be
extended by another six
months when the Organization
of the Petroleum Exporting
Countries meets in May.
The production-cut agree-
ment has helped improve the
outlook for oil in the near
term, but prices over the me-
dium term are expected to re-
main low and highly uncertain,
the IMF said. “So further sus-
tained fiscal adjustment re-
mains critical,” it added.
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
A6 | Wednesday, May 3, 2017
U.S. Needs ‘Good Shutdown,’ Trump Says
President tweets about
closing government to
‘fix mess’; Democrats
call that irresponsible
BY LOUISE RADNOFSKY
WASHINGTON—President
Donald Trump said a govern-
ment shutdown and a change
in Senate rules might be
needed to get his priorities
through Congress, comments
that came as the White House
tried to bat down suggestions
that Democrats were the win-
ners in the recent short-term
spending deal.
“The reason for the plan
negotiated between the Re-
publicans and Democrats is
that we need 60 votes in the
Senate which are not there!
We....either elect more Repub-
lican Senators in 2018 or
change the rules now to 51%.
Our country needs a good
’shutdown’ in September to fix
mess!” Mr. Trump wrote in
two tweets sent Tuesday
morning.
Mr. Trump’s suggestions
were received coolly on Capi-
tol Hill by both Republicans
and Democrats.
On eliminating the 60-
vote threshold to advance
legislation in the Senate, Ma-
jority Leader Mitch McCon-
nell (R., Ky.) said: “That will
not happen.”
“There is an overwhelm-
ingly majority on a bipartisan
basis not interested in chang-
ing the way the Senate oper-
ates,” Mr. McConnell said
Tuesday.
Republicans Are Losing Votes on Health-Care Bill
BY KRISTINA PETERSON
AND STEPHANIE ARMOUR
WASHINGTON—House Re-
publican leaders are on the
brink of losing too many GOP
votes to pass their health-care
bill overturning much of the
Affordable Care Act, poten-
tially dashing hopes raised by
the White House of a big legis-
lative win this week.
At least 21 House Republi-
cans have now said they op-
pose the latest version of the
Republican plan to overhaul
the health-care system, with
an almost equal number pub-
licly undecided on the bill.
House GOP leaders can likely
lose only 22 GOP votes to pass
the bill, because it isn’t ex-
pected to receive any Demo-
cratic support.
House GOP leaders—often
prodded publicly by the White
House—have tried to reach
enough support to call a vote
on the health bill twice before,
and a third disappointment
could sink their efforts for the
foreseeable future. That would
mark a significant setback for
a Republican Party that now
fully controls Congress and
the White House and has made
undoing the ACA a top prom-
ise for the past six years.
The president, vice presi-
dent and top aides had said
they were confident about
closing in on the votes for a
health-care bill soon.
Schools Get Break From Some Lunch Rules Man Receives 30 Years
BY TAWNELL D. HOBBS
The Trump administration
is scaling back some healthful
school lunch standards cham-
pioned by former first lady
Michelle Obama, as it seeks to
give schools more flexibility
with meals.
U.S. Secretary of Agricul-
ture Sonny Perdue announced
the changes Monday during a
visit to an elementary school
in Leesburg, Va.
Schools, which receive fed-
eral funding for meal pro-
grams, won’t have to meet
certain guidelines for whole
grain, sodium and milk.
The U.S. Department of Ag-
riculture said the decision
comes after years of feedback
from schools and food-service
experts, who have faced chal-
lenges meeting meal regula-
tions; and from students, some
of whom have complained that
the meals aren’t appetizing.
The department said the
change “begins the process of
restoring local control” over
those food areas to give schools
and states options in ensuring
Mick Mulvaney, director of the Office of Management and Budget, addresses the media at the White House on Tuesday.
Sen. Jeff Flake (R., Ariz.)
tweeted, “No, we don’t need a
government shutdown, and
no, we shouldn’t change sen-
ate rules on the legislative
filibuster.”
Democrats also criticized
the Trump suggestions.
“President Trump may not
like what he sees in this bud-
get deal, but it’s dangerous
On Tuesday, Rep. Fred Up-
ton (R., Mich.), a former
House Energy and Commerce
Committee chairman who is
widely respected among House
Republicans, told a Michigan
radio station he couldn’t sup-
port the bill in its current
form.
“There are a good number
of us that have raised real red
flags and concerns,” Mr. Upton
said. “It’s not going to get my
‘yes’ vote the way that it is.”
Mr. Upton’s opposition is a
significant blow to Speaker
Paul Ryan (R., Wis.) and other
Republican leaders because
the Michigan lawmaker was
one of the main authors of
previous bills that would re-
peal the ACA. He served on
the task force that helped
craft Mr. Ryan’s health plan
last year and has been a
strong proponent of toppling
the 2010 law.
On Monday, Rep. Billy Long,
a Missouri Republican who
doesn’t often break ranks with
GOP leaders, also said he
couldn’t support the bill.
GOP leaders have been
struggling to craft legislation
that strips away many of the
ACA requirements aggres-
sively enough to appease con-
servatives while maintaining
enough protections to pre-
serve support from centrist
Republicans. Tuesday’s devel-
opments suggest that task
may be beyond reach.
food choices are both healthy
and appealing to students.
“If kids aren’t eating the
food, and it’s ending up in the
trash, they aren’t getting any
nutrition—thus undermining
the intent of the program,” Mr.
Perdue said in a statement.
But American Heart Associ-
ation Chief Executive Nancy
Brown has concerns.
“USDA needs to remember
that schools around the coun-
try are making great progress
Agriculture Secretary Sonny Perdue joined students for lunch at
the Catoctin Elementary School in Leesburg, Va., on Monday.
* * THE WALL STREET JOURNAL.
U.S. NEWS
Trump’s request to cut NIH
funding.
In a hastily called confer-
ence call that followed the
president’s tweets, Mick
Mulvaney, director of the Of-
fice of Management and
Budget, forcefully repeated
the White House’s arguments
for why Republicans got a
good deal. But the call was
beset by technical troubles,
and Mr. Mulvaney was able
to offer few assurances to
temper Mr. Trump’s threat
of a shutdown, which could
leave Republican House and
Senate candidates vulnerable
in 2018 races if a shutdown
occurred.
On Tuesday, in the White
House briefing room, Mr. Mul-
vaney defended the spending
deal a third time, appearing
with pictures of planned bor-
der-security changes he said
would be funded by the deal.
In response to conservative
critics, he emphasized that a
JOSHUA ROBERTS/REUTERS
Republican-only bill couldn't
pass the Senate.
Mr. Mulvaney said he didn’t
anticipate a government shut-
down later this year, but he
understood the president’s
frustration over Democrats
“spiking the ball” after negoti-
ating with them in good faith.
and irresponsible to respond after media reports saying partial shutdown. A shutdown could happen if
by calling for a shutdown. Democrats were the winners The package includes in- they didn’t “behave any bet-
Hopefully, Republicans in in the negotiations to keep the creases in funding for border ter,” he said.
Congress will do for the next government open, which re- security and defense, a prior- “It’s not a goal,” he said
budget what they did for this sulted in a five-month deal ity for Mr. Trump and his fel- later, adding that to “the ex-
one: ignore President that would run to the end of low Republicans, but no tent the president advocated
Trump’s demands, work with the current fiscal year. money for the construction of for one” on Tuesday, it could
Democrats, and get it done,” Congress is expected to Mr. Trump’s Mexico border be productive if “it fixes
Sen. Patty Murray (D., Wash.) vote on the five-month spend- wall. It also includes a funding Washington.”
said. ing bill before midnight Fri- boost for the National Insti- —Byron Tau
Mr. Trump’s tweets came day, the deadline to prevent a tutes of Health, despite Mr. contributed to this article.
three dozen conservatives, en- main publicly undecided.
dorsed the bill last week after Some lawmakers are too
balking at its earlier version, skittish to even hint at which
and any new changes could way they are leaning.
prompt them to flee. Rep. Elise Stefanik (R.,
Mr. Ryan defended the bill’s N.Y.), a co-chairman of the
treatment of people with pre- Tuesday Group, a block of
existing conditions on Tuesday, about 50 centrist Republicans,
saying the GOP plan offered “a repeated Tuesday that she was
few layers” of protections. “part of the discussions mov-
“What’s important is we want to ing forward,” when asked if
have a situation where people she was undecided.
can afford their health insur- The inability to drum up
ance,” Mr. Ryan told reporters. the necessary votes is a poten-
House GOP leaders this tial embarrassment for the
AARON P. BERNSTEIN/REUTERS
week had launched an effort White House, which has
to sway the holdout centrists pushed to get a health deal af-
by assuring them the Senate ter an earlier version in March
would dramatically change failed to muster enough sup-
the bill, beefing up money for port in the House.
a program that helps con- Organizations opposed to
sumers with high medical the bill, including the Ameri-
costs obtain insurance and can Heart Association, Ameri-
Rep. Fred Upton (R., Mich.) helped write previous ACA repeal bills restoring some of the bill’s can Diabetes Association and
but said he couldn’t support the bill in its current form. steep cuts to Medicaid. March of Dimes, on Monday
That push seemed to work came out against the legisla-
Republican lawmakers in “I’ve supported the practice with some lawmakers. Rep. tion and the amendment that
swing districts have been es- of not allowing pre-existing Bill Johnson (R., Ohio) told re- could let states opt out of
pecially concerned over an illnesses to be discriminated porters Tuesday that he now some of the ACA’s insurance
amendment that could let against from the very get-go,” supported the bill after he “fi- regulations. The American
states opt out of parts of the Mr. Upton said Tuesday. “This nally got through dissecting it Hospital Association and
ACA. It would allow insurers amendment torpedoes that, all.” Mr. Johnson had said American Medical Association
in some states to charge and I told leadership that I Monday night he was still re- have also been against the bill
higher premiums to people cannot support this bill with viewing it. and its latest changes.
with pre-existing health con- this provision in it.” But GOP leaders failed to House Republicans hoped
ditions who let their coverage It isn’t clear if House GOP convince many centrists. to vote on the bill this week,
lapse. But many Republicans, leaders would be willing to In one measure of the anxi- potentially Thursday, in part
including Messrs. Long and change the bill further to ap- ety over the bill’s political so they could move on to
Upton, worried that this pease centrists’ concerns, and ramifications, many members other matters such as a tax
would break their promise on in any case doing so could of the House GOP whip team— overhaul.
a regulation that has long cost them the support of con- the lawmakers charged with —Natalie Andrews and
been the most popular part servatives. The House Free- counting and drumming up Louise Radnofsky
of the ACA. dom Caucus, a group of about votes for Republican bills—re- contributed to this article.
on healthy school meals, with
more than 99% of schools al-
schools experiencing hardship
in finding a full range of prod-
For Sexual-Abuse Site
ready in compliance,” Ms. ucts that meet whole-grain re- BY DEL QUENTIN WILBER the Justice Department.
Brown said in a statement. quirements; allow schools to “Child predators use online
“Rather than altering the cur- meet past targets for sodium A 58-year-old Florida man forums on anonymous net-
rent path forward, we hope instead of new higher limits, to was sentenced to 30 years in works to abuse and exploit
the agency focuses more on give more time to prepare ap- federal prison for operating children, preying on the inex-
providing technical assistance propriate foods; and allow what prosecutors described as perienced and vulnerable in
that can help schools get schools to serve flavored 1% fat a sophisticated website for society,” acting Assistant At-
across the finish line, if they milk, instead of just fat-free. distributing photos and vid- torney General Kenneth
haven’t done so already.” Meal guidelines imple- eos depicting the sexual abuse Blanco said in a statement
The changes will allow mented in 2012, called historic of children. Monday announcing the sen-
states to grant exemptions in at the time by the USDA, man- Steven W. Chase was con- tencing by a federal judge in
the 2017-18 school year to dated that schools offer fruits victed in September in North Statesville, N.C.
and vegetables daily, increase Carolina on federal charges of “The sentencing of the cre-
offerings of whole grain-rich creating and running the ator of the Playpen forum—
foods, offer only fat-free or Playpen website on the Tor along with the identification,
low-fat milk varieties, limit anonymity network. apprehension and prosecution
calories based on the age of After Mr. Chase’s arrest in of forum members around the
children to ensure proper por- 2015, federal agents obtained country—sends a message
tion size and give more focus court approval to deploy that online predators will be
on reducing saturated fat, hacking tools that success- caught and prosecuted,” Mr.
CAROLYN KASTER/ASSOCIATED PRESS
trans fat and sodium. fully pierced the service’s an- Blanco said.
The rules have extended be- onymity, federal officials said. Mr. Chase’s attorney, Peter
yond the lunch line, dictating Since then, agents have ar- Adolf, didn’t respond to an
what kinds of foods and bever- rested hundreds of the web- email or phone message seek-
ages can be served in vending site’s users, as well as more ing comment.
machines on school campuses. than two dozen producers of Two men who helped Mr.
Foods sold outside of the child pornography. Chase run the website were
lunch program but during the At least 55 U.S. children sentenced this year to two de-
school day, such as for fund- who appeared in images and cades in federal prison after
raisers, also must meet videos on Playpen were iden- pleading guilty to engaging in
healthy standards. tified or rescued, according to child exploitation.
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
THE WALL STREET JOURNAL. Wednesday, May 3, 2017 | A7

U.S. NEWS

Private Role
In Highway
Roils a State
BY VALERIE BAUERLEIN
CORNELIUS, N. C.—When
North Carolina brought in a
private operator to add toll
lanes to a 26-mile stretch of
highway north of Charlotte, its
goal was to reduce congestion
and build a road the state
couldn’t otherwise afford.
The hope was that the
state’s first public-private
faster than those carried out
by local and state govern-
ments, several toll-road proj-
ects around the U.S. have also
gone bankrupt.
“We’ve had a sea change,
and across the board in every
sector we’re seeing more of a
pivot to public-private part-
nerships,” said Jill Jamieson,
an infrastructure-finance spe-
cialist with real-estate-services

VALERIE BAUERLEIN/THE WALL STREET JOURNAL

partnership for roads would be
a model of efficiency and the
first of many such projects.
But the expansion of Interstate
77 has hit speed bumps, with
travel times lengthening and
accidents increasing. Now the
state is considering paying as
much as $300 million to get
out of the deal and retake con-
trol of the roadway.
Commuters and political
observers are saying the state
ceded too much control to Cin-
tra, the unit of Spanish infra-
structure firm Ferrovial SA
that signed the $650 million
contract in 2014. They would
have liked work to be done a
mile or two at a time rather
than nearly all at once, creat-
ing a 26-mile work zone. They
also say the state highway de-
partment should have re-
sponded better to complaints,
like those on Easter weekend,
when drivers said they were
dodging roadway debris.
The controversy comes as
the project’s public-private
funding model gains momen-
tum, with more than 30 states
allowing such partnerships for
major road jobs. A Pricewater-
houseCoopers report last year
said 17 states have closed such
deals, often in areas where Re-
publicans hold sway in the
state legislature, as is the case
in North Carolina. While the
approach can work well, with
advocates saying companies
are able to complete projects
firm JLL. There is a multitril-
lion dollar need to rebuild the
nation’s crumbling infrastruc-
ture, she said, and it would be
impossible without significant
help from the private sector.
In North Carolina, Cintra
Vice President Patrick Rhode
said the company is working
closely with state transporta-
tion officials to make sure the
work zone is safe. Cintra re-
cently agreed to a state re-
quest to make lane shifts more
clear by the use of newer,
more reflective lane-marking
material than the one specified
in the contract. He said con-
struction decisions are made
according to each individual
project and that the project
meets all state specifications
and safety guidelines. The I-77
project was set to be done on
time in 2018.
State transportation offi-
cials say congestion and an in-
crease in crashes (which are
up 45% in the first 15 months)
are to be expected during a
major road project. In re-
sponse to safety complaints,
the state has asked Cintra for
more frequent crash data and
a smoothing of grooves in
some lanes.
Steve Kite, the state’s head
of work-zone safety, said he
recently inspected the site,
finding some areas that
needed work but “as a whole,
it looks like other work zones.”
He noted that the project’s
Construction along Interstate 77 in North Carolina. The state is considering paying as much as $300 million to retake control of the roadway.
work zone is unusually long, gesture tho,” responded Dale sponsible for building roads— 495 Express toll lanes in Vir-
and much of it is lined with Earnhardt Jr., attaching a not public policy. “We cer- ginia allow drivers more pre-
concrete barriers that may photo of the construction tainly respect the wishes and dictable travel times in the con-
contribute to driver apprehen- zone. the oversight of our clients in gested suburbs of Washington.
sion. “I’m a capitalist, free-mar- any state where we operate,” Public-private partnerships
Lawmakers and business ket guy,” said Jim Puckett, a Mr. Rhode said. Cintra-built “develop infrastructure more
groups are pushing for the GOP Mecklenburg County com- roadways in Indiana and Texas quickly than conventional
project to be scrapped. The missioner. “But sometimes are functioning well for tax- funding models could provide,”
1,000-member Lake Norman there are solutions that only payers there, he said, as the said Ned Curran, a toll-lane
Chamber of Commerce argues the public sector can handle.” private sector bore the risk proponent and former chair-
the toll lanes are unlikely to A state review of the project when they ran into financial man of the N.C. Department of
reduce congestion because of last year estimated the trouble. Transportation. “We simply
the cost—as much as $20 breakup cost could run from Virginia recently selected don’t have enough money to
round trip during rush hour— $82 million to $300 million. A Cintra and Meridiam, an inde- keep up” with population
and the design, as the asphalt bipartisan group of legislators pendent infrastructure-invest- growth and the shift to urban
isn’t thick enough to accom- came close to breaking the ment firm, to run a $3 billion areas.
modate tractor-trailer trucks. deal last summer but balked project to overhaul Interstate But some of the public-pri-
Cintra says the tolls haven’t because it risked taking money 66 in the Northern Virginia vate toll-road projects have
been determined yet. away from other transporta- suburbs of Washington, D.C. had mixed results. Cintra-led
Many Nascar stars live on tion projects. The Presidio Parkway in Cal- projects in Texas and Indiana
Lake Norman north of Char- Newly elected Democratic ifornia, a six-lane toll road con- have landed in bankruptcy. A
lotte and haul trailers through Governor Roy Cooper has or- necting the city of San Fran- Congressional Budget Office
the congested work zone. “I dered an outside review of op- cisco to the Golden Gate Bridge, report in 2015 found that the
couldn’t hate highway 77 be- tions to change or break the is a $1.1 billion public-private privately run toll projects that
tween exit 30-23 any more,” Cintra contract, under which partnership that has won engi- failed had commonly overesti-
Danica Patrick said in a mes- the company has the right to neering awards for its earth- mated toll revenue, and newer
sage posted to Twitter in De- toll revenues through 2058. quake-resistant design and projects are seeking more pub-
cember. In response, Cintra’s Mr. preservation of the landscape. lic money through tax dollars
“The portajohn was a nice Rhode said the company is re- The privately run Interstate and bonds.

Former EEOC Lawyer Eyed for Civil-Rights Position

BY BETH REINHARD by the Senate, Mr. Dreiband, licing and voting rights aren’t
whose potential selection was known publicly, and that could
The White House is consid- reported last month by Na- be a point of contention for
ering Eric Dreiband, who filed tional Public Radio, would lead Senate Democrats and liberal
discrimination lawsuits as the the office at a time when hate activists, along with Mr.
top lawyer at the Equal Em- crimes are on the rise. Dreiband’s involvement in liti-
ployment Opportunity Com- The Senate Judiciary Com- gation against the Affordable
mission and has also defended mittee was holding a hearing Care Act.
big businesses from such law- Tuesday on the recent in- David Lopez, who served in
suits, to lead the civil-rights crease in religious hate the same job at the EEOC un-
division at the Justice Depart- crimes, which has included der Mr. Obama, said nothing
ment, according to people fa- dozens of bomb threats to in Mr. Dreiband’s record pro-
STEPHEN VOSS FOR THE WALL STREET JOURNAL

miliar with the matter.
Mr. Dreiband now works at
Jones Day, a law firm that has
become a popular wellspring
for the new administration and
supplied many of the lawyers
who sued the administration
of former President Barack
Obama over its health-care
law. Mr. Dreiband was part of
the legal team that repre-
sented Catholic plaintiffs ob-
jecting to the contraceptive
coverage under the law.
Mr. Dreiband also repre-
sented the University of North
Carolina system when it was
sued by the Justice Department
over a state law requiring
transgender people to use pub-
lic bathrooms matching the
Eric Dreiband, a former Equal Employment Opportunity Commission lawyer, is a candidate for a Justice post.
gender listed on their birth cer-
tificate. The university system
argued last year that it didn’t
intend to enforce the law.
Mr. Dreiband didn’t respond
to requests to comment.
The civil-rights division at
Jewish Community Centers.
The former acting chief of
the division under Mr. Obama,
Vanita Gupta, is among those
scheduled to testify. She has
sharply criticized the direction
of the civil-rights division un-
der Attorney General Jeff Ses-
sions, who has called for a
pullback from investigating
police departments accused of
civil-rights abuses and has
withdrawn from part of a vot-
ing-rights case in Texas.
the Justice Department, which ing rights and civil liberties. Mr. Sessions has suggested
will celebrate its 60th anniver- Former Attorney General Eric that federal oversight of police
sary this year, has broader au- Holder repeatedly called the departments has made them
thority than the EEOC to en- division “the crown jewel” of less aggressive in fighting
force federal laws barring the Justice Department. crime and helped fuel a surge
discrimination and to investi- If nominated by President in murders in some big cities.
gate alleged violations of vot- Donald Trump and confirmed Mr. Dreiband’s views on po-
vides “any glimpse about
whether he would be a rubber
stamp or counterweight to
General Sessions’ stated goal
to turn back the clock in areas
of voter disenfranchisement,
police-community relations
and the broad gamut of press-
ing civil-rights issues requir-
ing an active and vigilant civil
rights division.”
Leslie Silverman, a former
EEOC commissioner, said he is
well-suited to the job.
“He’s a lawyer’s lawyer with
incredible integrity,” she said.
“He strongly believes in civil-
rights laws and wants to see
them fairly applied.”
—Louise Radnofsky
contributed to this article.

U.S. WATCH
Consumers Appear
SOUTH CAROLINA
Ex-Policeman Pleads
issue that pulled the state into
the center of a national debate
over same-sex marriages fol-
Ready to Spend Again
Guilty in Shooting lowing a historic Supreme Court BY JOSH MITCHELL ing led U.S. economic output
ruling. to grow a tepid 0.7%, at an an-
The former North Charleston, David Ermold and David WAS H I N GT O N —A m e r i - nual rate, in January through
S.C., police officer who shot un- Moore tried to get a marriage li- cans’ spending grew steadily March, but Friday’s report
armed black motorist Walter cense in Rowan County, Ken- in March after accounting for hinted at momentum at the
Scott agreed to a plea deal on tucky, in June 2015 after the inflation, positioning the econ- end of the quarter.
MIC SMITH/ASSOCIATED PRESS

federal civil-rights violations, ac-
cording to a person familiar with
the case, a week before jury se-
lection in the case was to start.
Michael Slager entered a
guilty plea Tuesday in District
Court in Charleston, S.C. It is un-
clear what the plea deal entails,
but it would resolve charges
pending in both federal and state
courts, according to the person
familiar with the case. State
prosecutors had said they ex-
pected to retry Mr. Slager, after
a judge declared a mistrial in a
five-week state trial on homicide
charges in December.
Mr. Slager, a white 35-year-
old, was charged with violating
Mr. Scott’s civil rights by fatally
shooting him after an April 2015
Michael Slager, right, pictured in December in Charleston, S.C.
traffic shop. The shooting was
captured on cellphone video,
which showed Mr. Slager shoot-
ing Mr. Scott repeatedly in the
back as he ran away. Attorneys
for Mr. Slager and the Scott fam-
ily couldn’t be reached, nor could
representatives for the Charleston
solicitor and the U.S. Attorney.
—Valerie Bauerlein
and Del Quentin Wilber
U.S. Supreme Court ruled same- omy to rebound from another “The fundamentals on ro-
sex marriage bans were uncon- winter slowdown. bust consumer spending are in
stitutional. But Kim Davis, the But consumer prices fell, a place, such as elevated levels
county clerk, refused to issue sign of underlying weakness of consumer confidence, rising
them a license because she said that could give the Federal Re- real disposable income, and in-
it violated her religious beliefs. serve pause as it considers creasing household net
Messrs. Ermold and Moore further increases in its bench- worth,” IHS Markit economist
sued, along with several other mark interest rate. Chris G. Christopher Jr. said in
couples. Ms. Davis lost, and Personal consumption rose a note to clients.
spent five days in jail for refus- 0.3% after inflation, the Com- Some economists believe
KENTUCKY ing to follow a court order. merce Department said Mon- temporary factors led to weak
The couple want Ms. Davis to day. That followed two months spending in the first quarter,
Gay Couple’s Suit pay damages for the emotional of declines. Without accounting including a warm winter that
Allowed to Proceed distressed caused by her refusal for inflation, spending was flat. drove down Americans’ heating
to issue them a license. The figure, combined with bills and a delay in tax refunds
A federal appeals court says Liberty Counsel, the law firm gains in Americans’ incomes, that gave them less money to
a gay couple’s lawsuit seeking that represents Ms. Davis, has offers early evidence the econ- spend. Spending is expected to
damages from a Kentucky argued that she has immunity omy’s first-quarter slowdown pick up in the spring largely
county clerk who refused to is- from paying damages because may have been a blip and that because of rising incomes. Per-
sue them a marriage license can she is an elected official. growth could pick up this sonal income rose 0.2% in
proceed. The ruling revives an —Associated Press spring. Weak consumer spend- March from a month earlier.
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
A8 | Wednesday, May 3, 2017
LEND
Continued from Page One
10-fold. Business lending has
tripled, while loans in its pri-
vate-wealth division, secured
by everything from stock port-
folios to rare artwork, have
quadrupled. Goldman doesn’t
report revenues tied to lend-
ing, which remains a small part
of its overall business.
“It’s not quite Bailey Savings
& Loan,” said Glenn Schorr, a
research analyst who covers
banks, “but it’s getting closer.”
The pivot has brought cul-
tural shifts to a firm ruled by
hard-charging deal makers and
traders. Mr. Scherr recruited
executives from finance arenas
foreign to Goldman’s world—
from Discover Financial Ser-
vices, Capital One Financial
Corp., regional banks and on-
line lenders.
Cultural shifts
Into a firm known for court-
ing the financial elite, he hired
executives skilled at selling to
the masses—from underwear
retailer Jockey International,
food-delivery app GrubHub
Inc., concert promoter Live Na-
tion Entertainment Inc. In Jan-
uary, Goldman reorganized sev-
eral hundred employees into a
new division reporting to Mr.
Scherr named Consumer and
Commercial Banking.
Some Goldman investment
bankers have privately grum-
bled at being cast as small-
town lenders. Other current
and former executives say the
push is misguided, exposing
Goldman to a new risk—the
American borrower—in hopes
of collecting a few nickels on
the dollar.
Goldman’s lending push
comes as the financial system
is awash in capital and de-
mand for new loans is starting
to flag. What’s more, en-
trenched lenders such as Citi-
group Inc. and J.P. Morgan
Chase & Co. have deep rela-
tionships with CFOs and trea-
surers, who typically decide
which banks to borrow from.
“When you need money
and you pick up the red
phone, it goes to J.P. Morgan,
Bank of America, Citi,” said
Tom Deas, former treasurer of
chemicals maker FMC Corp.
and now chairman of the Na-
tional Association of Corpo-
rate Treasurers. “That will be
slow to change.”
Last month, Goldman got a
reminder of why it must find
new ways to make money. Its
trading desk stumbled badly,
reporting weak quarterly num-
bers that Chief Financial Offi-
cer R. Martin Chavez said
“served as a reminder of the
benefits of having a diversified
global client franchise.”
Goldman’s push to lend—
still in its early days—further
blurs the lines that separated
investment banks like it from
commercial banks. The former
made money on their wits, bro-
kering deals and trading secu-
rities; the latter took deposi-
tors’ cash and lent it, pocketing
the difference.
Goldman began as a
lender. In the 1870s, its immi-
grant founder Marcus Gold-
man sold short-term credit
known as commercial paper
to merchants along Manhat-
tan’s wharves.
As the firm grew, it focused
on brokering deals and trading
big slugs of stock, arenas where
the fees were larger and the
field less crowded. Goldman’s
BARBER
Continued from Page One
said Sandra Mullins, president
of the Association of Cosme-
tology Salon Professionals, a
national group for the hair-
dressing camp. Barbers, mean-
while, can have less freedom
to do perms, Ms. Patton said.
(Hairdressers and cosmetolo-
gists outnumber the nation’s
59,200 barbers 10 to 1, accord-
ing to federal data.)
Barbers say the pole is
theirs alone, a historical symbol
rooted to a time when barbers
also yanked teeth and did blood
letting. The red stripe repre-
sents blood, the white symbol-
izes bandages, and the blue, ac-
cording to some theories, is for
veins, say barber historians.
Hairdressers see this “ker-
fluffle” as hair splitting.
“It’s silly,” Ms. Mullins said.
The snippy back-and-forth
comes as old-school short hair-
cuts, popularized in shows like
“Mad Men,” are back in fashion
and as young men are bigger
groomers than past genera-
tions. That presents an oppor-
In lending, ‘we can only go up,’ says Stephen Scherr, who oversees the lending effort as CEO of Goldman Sachs Bank USA.
specialty was turning over cap-
ital quickly, squeezing profit
from the same dollar again
and again. By contrast, lending
money locked it up for years.
“We were in the moving
business,” Mr. Scherr said, “not
the storage business.”
After Congress in 1999 re-
pealed a Depression-era law
that had kept the two separate,
J.P. Morgan, Citigroup and
other commercial banks bar-
reled into Goldman strongholds
such as trading and underwrit-
ing, where margins were fatter.
Goldman decided not to re-
ciprocate and challenge its com-
mercial cousins on their turf. It
lacked a big cache of retail de-
posits to fund loans cheaply,
and its executives tended to
view lending as pedestrian and
commoditized—a business built
on brawn, not brains.
‘We’re a bank,’ says
Goldman Sachs CEO
Lloyd Blankfein. ‘We
should act like one.’
While rivals sent armies of
lending specialists to Main
Street, Goldman’s M.B.A.s and
Ph.D. “quants” stuck to doling
out high-touch services to com-
panies, hedge funds and gov-
ernments. The firm rode one
Wall Street wave after another
to huge profits.
It did make occasional
loans, principally to wealthy
or corporate clients it hoped
to keep close.
The first seeds of change
were sown over a hectic Sep-
tember 2008 weekend. With its
shares tanking and clients pull-
ing cash, Goldman ceased to be
an investment bank. Under
pressure from the Federal Re-
serve, it legally converted to a
commercial bank, gaining ac-
tunity to barbers who have
been luring back men after los-
ing them over the years to hair
salons, said Bob Marvy, the
owner of pole proprietor Wil-
liam Marvy Co. The Minnesota
firm says it is the only remain-
ing manufacturer of commercial
barber poles in North America,
although “more are coming in
from China,” Mr. Marvy said.
For hairdressers to compete
for the men’s market, they’ve
given their salons a vintage
feel that might include old
barber chairs—and yes, barber
poles, said Ms. Mullins of the
national cosmetology associa-
tion. “I don’t think you attract
as many men if your salon is
all crystal chandeliers and
very girlie,” she said.
Still, salons must walk a
fine line, or they can land in
the crosshairs of barber
cops—a serious crew that
doesn’t cut corners.
When Sam Barcelona, exec-
utive director of the Arizona
State Board of Barbers who is
also an inspector, visits estab-
lishments, he drives a white
state vehicle, carries an 8x12
“inspection book,” and if chal-
lenged, might flash his gold
IN DEPTH
cess to cheap government cash
that calmed panicky investors.
Goldman welcomed the life-
line but had little interest in
retail or commercial banking.
Some executives debated try-
ing to shed the firm’s new sta-
tus, which had brought addi-
tional federal oversight. The
newly created banking entity
sat mostly empty.
The postcrisis world proved
a harder place to make money,
amid new regulation, a global
recession and low interest
rates. Bond-trading revenues, a
huge driver of profits, fell to
$8.7 billion in 2013 from $21.9
billion in 2009. Mr. Blankfein,
CEO since 2006, began pushing
executives to find ways to grow.
Some floated the notion of
moving into traditional lending,
but there was still resistance.
David Viniar, Goldman’s long-
serving chief financial officer,
was skeptical of lending, ac-
cording to people familiar with
Mr. Viniar’s position. He kept a
toaster in his office as a re-
minder of Main Street banking
gimmicks to avoid. Mr. Viniar
left the post in 2013, remains
on Goldman’s board and sup-
ports the firm’s current efforts.
At a management off-site
in the Hamptons in the sum-
mer of 2014, executives batted
around ideas for growth, ac-
cording to people familiar with
the meeting. Some made a case
for looking for new revenues
by using Goldman Sachs Bank
USA, the legal entity created at
regulatory gunpoint in 2008.
Goldman was being regu-
lated like a Main Street bank,
they argued, but wasn’t reap-
ing the benefits. What’s more,
they said, politicians had many
Wall Street activities in their
crosshairs but tended to view
lending as a social good, help-
ing small businesses thrive and
families make ends meet.
“The feeling was that no-
body was going to get hauled
in front of Congress” for writ-
ing simple loans, one executive
remembers. Several Goldman
officials had testified in Wash-
ington about the bank’s crisis-
era mortgage-trading activities,
a scarring episode for the
firm’s image.
Mr. Scherr, whom Mr. Blank-
fein tapped to lead the effort,
began assembling a team. He
recruited Harit Talwar from
Discover, the credit-card giant,
and Dustin Cohn, Jockey’s head
of marketing.
Goldman launched a busi-
ness last fall to make online
badge, which is decorated with
the state seal and the title Ari-
zona Regulatory Investigator.
“It looks just like a detective
badge you’ve seen on ‘Drag-
net,’ ” he said.
Just the other day, one of
his inspectors checked on a
salon that used to also employ
a barber. The barber no longer
worked there.
The salon owner did still
have a depiction of a barber
pole painted in her window.
That, according to Mr. Barce-
lona, violated Arizona Adminis-
trative Code R4-5-305 (c), or
Sarah Lounder, owner of Cuts on Main salon in Winchester, N.H.
THE WALL STREET JOURNAL.
Goldman has subtly pivoted
in such deals, angling for a
larger share of the fees that
come from providing the
money, not just advice, for
deals. “That was the white
MICHAEL BUCHER/THE WALL STREET JOURNAL; MICHAEL NAGLE/BLOOMBERG NEWS (BLANKFEIN)
space on the map,” said John
Waldron, who runs the invest-
ment-banking unit in the U.S.
In late 2015, when Gold-
man’s top retail-industry
banker, Kathy Elsesser, was
talking to Newell Rubbermaid
Inc. about buying rival Jarden
Corp., she brought colleagues
who specialized in raising debt
to early meetings. Their mes-
sage, according to people who
attended: “We can do this. You
don’t have to go to” a big com-
mercial lender.
The $10.5 billion check
Goldman wrote Newell to fi-
nance the deal was the bank’s
single largest loan ever. That
was topped last summer by an
$11.4 billion loan commitment
backing Bayer AG’s acquisition
of Monsanto Co. Goldman
ranked third last year in ar-
ranging loans for U.S. deals,
up from ninth in 2012, accord-
ing to Dealogic.
Much of that debt is sliced
Credit Score up and sold quickly, so Gold-
Goldman Sachs, once content to leave loans to other firms, has man doesn’t carry much risk.
moved into a range of new lending businesses. Overall, though, corporate
loans held on the firm’s books
$100 billion 2016 total grew to $28.7 billion in 2016
loans: from $15.0 billion in 2014, fil-
$94.93 billion ings show.
80
Other:
$49.23 billion Stash of deposits
60 Funding the firms’ loans is
Consumer: a growing stash of deposits.
$3.03 billion Goldman for years financed
40 activities by borrowing
Commercial: against holdings of securities,
$22.15 billion
a strategy that left it exposed
20
Real Estate: during the financial crisis. It
$20.52 billion branched out in 2016, buying
0
an online savings-account
platform from General Electric
2010 ’11 ’12 ’13 ’14 ’15 ’16 Co. and began taking retail de-
Source: the company THE WALL STREET JOURNAL. posits for the first time. Mean-
while, it has been gathering
more of its corporate and
New at Goldman: tives suspected it cost Goldman wealthy clients’ extra cash.
a coveted role on Kraft’s IPO Deposits have increased to
Rainy-Day Lending that year, then the second-larg- $124 billion in 2016 from $28
est in history. billion in 2008, still a fraction
That wouldn’t happen today, of J.P. Morgan’s $1.4 trillion.
In its push to lend more, said Susie Scher, Goldman’s top Still, it is slow going overall.
Goldman Sachs Group Inc. is en- banker for investment-grade When AT&T Inc. needed $40
tering the unsexy world of debt. “It’s a cultural shift,” she billion in debt to buy Time
rainy-day credit to companies. said. “The mentality now is that Warner Inc., it called J.P. Mor-
It is one of the worst busi- we have to lend to support our gan and Bank of America Corp.
nesses on Wall Street because clients.” Goldman executives chafed at
fees are low and companies Still more lending initiatives the miss, said people familiar
tend to draw on the loans only are planned. Goldman executives with the bank, which left it out
when in trouble. Banks make have discussed adding trade fi- of 2016’s biggest takeover.
these “relationship loans” in nance, which companies use to There is also a danger that
hopes of building client loyalty import and export goods, and Goldman, hungry for market
for better work later. are looking for new ways to share, takes on risky assign-
Goldman historically declined lend to individuals, perhaps by ments. Two financing deals for
to play that game, even when making car loans or advancing private-equity buyouts last year
marquee assignments were at money for online purchases, earned Goldman a formal repri-
stake. In 2001, it didn’t partici- people familiar with the firm mand from banking regulators
pate in a loan Kraft Foods was said. who felt the companies would
raising. Some Goldman execu- —Liz Hoffman carry too much debt. A third
was rejected by bond investors,
who forced Goldman’s client to
loans of a few thousand dollars ing than that,” said Mr. Schorr, pay a higher interest rate.
to individuals. Named Marcus, the analyst. And lending to consumers
after Goldman’s silk-hat-wear- Goldman’s lending push can be risky, especially because
ing, credit-selling founder, it also extends into its invest- Goldman is targeting those al-
targets borrowers carrying ment bank, which advises ready heavily in debt. Goldman
high levels of credit-card debt companies on mergers and is entering the space amid new
and offers to refinance at lower fundraising. It is the firm’s cracks in the market: Store-
rates. It has lent about $1 bil- second-largest division by rev- card issuer Synchrony Finan-
lion in its first six months. enue and its most profitable. cial and Capital One both set
Years ago, Goldman would For decades, Goldman’s in- aside hundreds of millions of
likely have “securitized” the vestment bankers specialized extra dollars last quarter to
loans, bundling them, slicing in negotiating the sale of their cover an expected rise in
them up and selling the pieces. clients to corporate buyers. credit-card delinquencies.
That would have freed up Fees on the “sell side” are pre- “If you are driven by invest-
those loan dollars to be used dictable, but usually lower ment-banking mentality, retail
elsewhere and earned lucra- than those earned by the ac- banking, in the main, is differ-
tive fees for Goldman’s trad- quiring company’s banks, ent,” said Deanna Oppen-
ers. In perhaps the most strik- which raise debt to fund take- heimer, who ran Barclays PLC’s
ing sign of Goldman’s overs. Goldman earned $56 retail operations and now runs
newfound taste for plain-va- million for advising Botox a financial-services consulting
nilla banking, the firm plans to maker Allergan on its 2015 firm. “The products are simple,
keep the loans and pocket the sale; J.P. Morgan earned more but the complexity is in the
interest payments. than $200 million arranging a scale, and it’s not a slam-dunk
“It’s hard to get more bor- loan for the buyer, Actavis PLC. that they get that right.”
the unlawful display of a barber
pole, or its “likeness,” without
a licensed barber on duty.
The proprietor, who said
and say I’ll have a cream soda
and a haircut,” he said.
The main tipsters to this
regulatory violation of unsanc-
inspection form” that accused
Ms. Lounder of running afoul
of an obligation to “advertise
or solicit clients in the proper
she wasn’t aware of the rules, tioned barber poles are bar- manner as required.”
is being given a chance to bers, said Ed Highley, execu- “Barber pole must be
comply, he said. If she doesn’t, tive director of the Ohio State painted over or covered as
“she could be cited under the Barber Board. “The general there are no barbers here,” the
statute,” he said. Fines, if im- public is not going to call and inspector wrote on the form,
posed, can range from $50 to say, ‘Hey, this salon is flying a which also assessed Ms. Loun-
$500 per incident. barber pole,’ ” he said. der a fine that totaled $3.
The pole politics don’t apply In New Hampshire, Ms. Ms. Lounder said a follow-
to say, a restaurant that might Lounder, a licensed cosmetolo- up letter arrived by mail, tell-
want to throw up a barber pole gist, said things got hairy on ing her again to comply with
for decoration, because that Feb. 3 when an inspector from the statute.
use isn’t confusing anyone. the state Board of Barbering, At an April meeting, the
“Nobody is going to jump up Cosmetology & Esthetics ar- board denied Ms. Lounder’s
rived unannounced. request to drop the matter.
The board had dispatched “Although it is not a barber
the inspector after receiving a pole in the traditional sense,
complaint—it won’t yet say the Board voted it is mislead-
from whom—about an alleged ing and violates Bar 302.05
wannabe barber pole outside (n),” Kathryn Wantuck, the
Cuts on Main. board’s executive director,
Ms. Lounder wasn’t in the wrote Ms. Lounder on April 11.
shop when the inspector, who The board plans to discuss
drove a government car and Ms. Lounder’s pole predicament
carried a state-issued photo again at its May 8 meeting.
ROBERT PATTON-SPRUILL
ID, arrived, but a hairstylist in Ms. Lounder is combing
Ms. Lounder’s salon was. through her options, but she’s
The inspector noted a strip not eager to pony up the fine,
of the external bricks painted which could rise to $500 and
red, white and blue, likely left lead to loss of her license, or
by the previous tenant who repaint. “I don’t want to do it,”
was a barber, and left a “shop she said. “It’s the principle.”
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
THE WALL STREET JOURNAL. Wednesday, May 3, 2017 | A9

LIFE&ARTS
YOUR HEALTH | By Sumathi Reddy

The Big Debate

On Hearing Aids
As demand rises, should people be able to
buy them over-the-counter at the drug store?
Federal lawmakers are considering it
SHOULD HEARING AIDS be sold at lo-
cal pharmacies like a pair of reading
glasses?
It is a question that federal lawmak-
ers are now considering with bipartisan
legislation to create a new category of
hearing aids sold over-the-counter for peo-
ple with mild to moderate hearing loss.
Patient advocate groups like the Hearing
Loss Association of America say the pro-
posed legislation would increase access to
hearing aids, which cost an average of nearly
$5,000 for a pair. Hearing aids aren’t cov-
ered by Medicare and typically not paid for
by many private insurance companies
either. The price includes the fitting
and tuning of the device done
by an audiologist or hear-
ing aid dispenser.
Medicare doesn’t
cover the cost of hear-
ing aids because a
statute from the 1960s
specifically prohibited
paying for them. At
the time, there was lit-
tle awareness of the im-
pact of hearing loss on
health outcomes and the
few available hearing aids
weren’t very good or expensive,
said Frank Lin, an associate profes-
sor of otolaryngology-head & neck surgery at
Johns Hopkins University who researches
the link between hearing loss and the in-
creased risk of dementia.
Because private insurance companies typi-
cally follow Medicare’s lead, they also ha-
ven’t covered the cost of hearing adds
though some plans are starting to, he said.
(Medicare doesn’t cover the cost of eye ex-
ams or eyeglasses either. Private insurance
varies on vision coverage.)
An estimated 30 million Americans have
some degree of hearing loss and the num-
bers are growing. A study published last
month by Johns Hopkins University re-
searchers predicted that the number of U.S.
adults with hearing loss will nearly double
by 2060. Yet it is estimated that 67% to 86%
of people who would benefit from using a
hearing aid don’t use them.
Patricia Holland was among them. When
she first noticed age-related hearing loss,
she waited about three years to buy a hear-
ing aid because of the sticker shock.
“I only bought a hearing aid in one ear be-
cause the cost was so high but you really need
two for balance,” said Ms. Holland, a 79-year-
old retiree living in Waltham, Mass. Five years
later she finally bought a second hearing aid.
CLOCKWISE FROM TOP RIGHT: GETTY IMAGES/ISTOCKPHOTO; BOSE; ETYMOTIC RESEARCH, INC.; STARKEY HEARING TECHNOLOGIES
The BEAN costs $214
a piece, and fits in
the outer ear. Its
buyers often
experience age-
related hearing loss.
The momentum for OTC hearing aids be-
gan with a National Academies of Sciences,
Engineering and Medicine report published
last year calling for more efforts to provide
adults with affordable hearing aids. The re-
port recommended that the U.S. Food and
Drug Administration remove the regulation
that requires either a medical evaluation or
that individuals sign a waiver that they
aren’t getting one before purchasing a hear-
ing aid, a move the FDA subsequently made.
It also called for the creation of a new cat-
egory of OTC wearable hearing devices—sep-
arate from hearing aids used for more severe
hearing loss. That is what the current pro-
posed bill would do, while also directing the
FDA to devise safety and effectiveness stan-
dards for the new class of hearing aids. Tech-
nology companies with personal sound am-
plification products—called PSAPS—that are
already commercially available, often at
lower prices than traditional hearing aids,
are a big proponent of the legislation as it
would enable them to market their products
for hearing loss.
Barbara Kelley, executive director of the
patient advocacy group the Hearing Loss
Association of America, says every day they
get up to eight emails or calls from people
saying they can’t afford to buy hearing aids.
“Cost is a barrier,” she said. “Stigma is a
barrier. Access to care is a barrier. People with
mild to moderate hearing loss aren’t even tak-
ing the steps to get hearing health care.” She
noted that research has shown that untreated
hearing loss is associated with many other
health conditions, such as increased risk of
falls, anxiety, isolation and cognitive declines.
The traditional hearing aid industry—
controlled by about half-a-dozen compa-
nies—is against the bill while audiologist
groups have concerns. “Hearing loss is a
health issue,” said Brandon Sawalich, senior
vice president of Starkey Hearing Technolo-
gies, the only U.S.-based manufacturer of
hearing aids, and chairman of the board of
the Hearing Industries Association, a trade
group. “Going about it with self-diagnosis
and self- treatment is not a responsible way
to approach hearing loss.”
The HIA would support OTC hearing aids
for mild hearing loss, said Mr. Sawalich, but
 Starkey Hearing
Technologies makes the
traditional Muse hearing
aid. The company doesn’t
set the prices for
dispensers, but it sells for
approximately $1,500 to
$3,000 a hearing aid.
Bose makes
conversation-
enhancing
headphones that
sell for $499.95.
Bose and others
may not currently
market devices
as hearing aids.
not moderate hearing loss.
Ian Windmill, president of the American
Academy of Audiology, a professional or-
ganization of audiologists, said the group
hasn’t taken an official position on the pro-
posal yet but has some concerns and wants
to make sure consumers are properly in-
formed on the different devices and what
they are for.
Manufacturers of PSAPS, made by tech-
nology companies like Doppler Labs and
Bose, are usually smaller than traditional
hearing aids, can be adjusted by smartphone
apps and are significantly cheaper, usually
less than $500 per ear. But the companies
currently aren’t allowed to market their
products for hearing loss because they are
not medical devices approved by the FDA.
“Consumers with mild hearing challenges
don’t often want to get a hearing test and
go to an audiologist and get a prescription
for a costly hearing aid,” said Julie Kearney,
vice president of regulatory affairs for the
Consumer Technology Association, a trade
association with 2,200 members, that repre-
sents companies that make PSAPs.

TALK RADIO

THE WOMAN BEHIND HOWARD STERN

Mr. Stern mentioned Ms. Turk
BY JOE FLINT
on air two weeks ago in a dia-
tribe at listeners who miss the
SHE IS RARELY mentioned on- old Howard. “The new thing from
air. She doesn’t have a funny the people who now hate me is,
nickname like producer Gary ‘oh Howard changed because of
Dell’Abate’s “Baba Booey” nor is Marci Turk … he got this woman
she endlessly teased and tor- in there and she calls the shots
mented like staff writer Benjy on the show and she won’t let
Bronk. Not even many longtime him do this or that,’ ” Mr. Stern
listeners know her name. said on his April 19 show. The
But to anyone close to show’s subjects, he contin-
Howard Stern, the self- ued are “where I want
proclaimed king of all to go.”
media, Marci Turk “It seems like all
is “The Howard the drama around
Whisperer.” The her has to do
chief operating with the long-
officer of Mr. standing Howard
Stern’s Sirius XM Stern aficiona-
Satellite radio op- dos,” says Eric
erations, Ms. Turk Sherman, a long-
has become some- time talent man-
thing of a gatekeeper ager whose clients
to the radio star and have included Aeros-
GETTY IMAGES (2)

one of his most trusted ad- mith lead singer Steven

visers.
As Mr. Stern tries to broaden
his appeal and soften his image,
some fans are complaining Ms.
Turk has cleaned up the shock
jock and made him safe for the
kind of celebrities he used to
mock. With Mr. Stern devoting
more of his show to being a seri-
ous interviewer, Ms. Turk is often
accused in chat rooms of making
him more politically correct. In
February, for example, Mr. Stern
spent 90 minutes interviewing
“Girls” star and creator Lena
Dunham who later called him a
“feminist.” Musician Sheryl Crow
and actor Steve Martin have been
guests. Lengthy celebrity inter-
views mean less time for his
usual high jinks.
Tyler, who has often appeared on
the show. “Under her watch, he
has excelled,” he adds.
Mr. Stern, Ms. Turk and Mr.
Dell’Abate didn’t respond to re-
quests for comment.
The 63-year-old Mr. Stern has
two Sirius satellite radio chan-
nels. Howard 100 carries his now
three-days-a-week program; How-
ard 101 is primarily a highlight
reel, featuring shows going as far
back as his days at WXRK-FM
New York in the 1980s and 1990s.
Sirius has over 31 million sub-
scribers but doesn’t break out Mr.
Stern’s audience. However he is
their biggest star.
While Mr. Stern has made prac-
tically all of his crew part of the
show, Ms. Turk has remained
Marci Turk, above, has worked with radio star Howard Stern, left, since 2012, and has helped reshape the host’s image.
mostly behind the scenes. She has
been working with Mr. Stern since
2012. At that time, Mr. Stern was
growing frustrated with managing
all the details of his show, people
close to him say. He had recently
joined the NBC show “America’s
Got Talent” as a judge.
Mr. Stern also was seeking to
elevate his show and create a
friendly atmosphere for lengthy
interviews with actors and musi-
cians. He has said on-air that he
had gone just about as far as he
could go interviewing a steady
stream of strippers and adult-film
stars. So Mr. Stern called David
Allen, author of “Getting Things
Done: The Art of Stress-Free Pro-
ductivity” and asked for help.
“He contacted our offices di-
rectly and asked, ‘hey do you have
any coaches,’ ” says Mr. Allen, who
directed him to Ms. Turk who had
been working out of David Allen
Co.’s New York office.
In December 2012, Mr. Stern
summoned his staff to an audito-
rium in the McGraw Hill building
in Midtown Manhattan, which is
home to Sirius XM. Mr. Stern be-
rated his staff for not getting his
show to the next level, people in
attendance say. Ms. Turk didn’t
attend, but Mr. Stern mentioned
that he was bringing her on in a
senior role.
Ms. Turk moved to lead out-
reach to bigger stars and their
publicists to entice them to come
on the show and convince them it
was a safe environment. During
his April 19 show, Mr. Stern said
he had strippers and naked
women on for years and “you’ve
got to constantly change up the
show and constantly work on
what you find funny.”
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
A10 | Wednesday, May 3, 2017 THE WALL STREET JOURNAL.

OPINION
REVIEW & OUTLOOK
A Macron Victory Won’t
Trump and the Despots Be a Win for Liberalism
P
resident Trump’s White House invita- and position Mr. Marcos as his successor.
tion to Philippine leader Rodrigo Du- Mr. Duterte is also drawing the Philippines By Francesco Ronchi shifting toward antiglobalization, anti-

W
Europeanism and more protectionist
terte last Friday not only gave human- closer to China, a concern given the country’s
ith Emmanuel Macron’s break- preferences.
rights advocates conniptions, strategic geography. On a trip through in France’s first- Mr. Macron’s likely victory would by
it took the President’s own Duterte gets a White to Beijing last October, he round presidential vote and no means be an accident of history. A
advisers by surprise. Then House invite in return proclaimed, “America has lost his likely victory on Sunday, observers large majority of French voters sup-
over the weekend he asked now. I’ve realigned myself in may be forgiven for thinking that the port democratic renewal and the reju-
Thailand’s junta chief Gen. for . . . nothing. your ideological flow.” Mr. French still support free flows of peo- venation of French politics, which the
Prayuth Chan-ocha to visit Duterte offered to set aside ple and goods across borders. Au con- young, former economy minister touts.
too. For bad measure, on disputes with China over ter- traire, Mr. Macron’s victory will not But Mr. Macron’s victory could also be
Monday Mr. Trump said he’d “honored” to ritory in the South China Sea, though Manila represent the triumph of liberalism. attributed to voters’ dislike of Ms. Le
meet North Korea’s Kim Jong Un under the won an arbitration verdict in the Hague con- France’s 2017 presidential election may Pen’s National Front party, which has
right circumstances. demning China’s depredations. be remembered as the moment the a history of illiberal views that still
country’s traditional left-right political horrify many voters, even if they agree
Mr. Trump’s deal-making confidence is well Washington wants Philippine support for
divide entered into its death throes. with some of the party’s ideas.
known, as is his receptiveness to strongmen freedom of navigation patrols in the area and According to a Yougov poll con- Should Mr. Macron end up with a
such as Russian President Vladimir Putin and to isolate North Korea. Engagement might ducted just five weeks before last mandate from voters who don’t fully
Egyptian President Abdel Fattah el-Sisi. In- moderate Mr. Duterte’s behavior at home and month’s vote, an overwhelming major- share his vision for France, he can at
stead of going over that ground again, let’s fo- secure his cooperation in the region. But it’s ity of French voters see globalization least rely on the country’s political in-
cus on Mr. Duterte as a case study of why for- a long shot and any diplomatic campaign as a threat to France. Support for the stitutions for support. Unlike other Eu-
eign policy shouldn’t be made on the fly. would need to be carefully planned and exe- European Union has plummeted in re- ropean parliamentary systems with
Most of the international outrage against cuted. cent years. What’s more, the sum of
Mr. Duterte focuses on his antidrug war, and A clumsy attempt at engagement that en- first-round votes for the far-right can-
understandably so. The Philippine President dorses Mr. Duterte’s antidemocratic tendencies didate Marine Le Pen, the radical left’s French voters are turning
Jean-Luc Mélenchon, the nationalist
openly encourages police and vigilantes to could wreck the special relationship between away from free trade,
Nicolas Dupont-Aignan and other anti-
kill drug dealers and users on sight; more the U.S. and the Philippines. Filipinos’ warm
than 8,000 have been gunned down, including feelings toward Washington are based in large
capitalist candidates approached 50%, immigration and the
the most impressive showing for polit-
innocent bystanders. He boasts of killing part on the Reagan Administration’s help in the ical extremists in the history of the European project.
three suspects himself when he was mayor 1986 ouster of Ferdinand Marcos and U.S. sup- Fifth Republic.
of Davao City. port for the country’s democracy. Sociologically, these candidates rep-
Mr. Duterte’s attacks on Philippine democ- Mr. Trump’s overture may make a rap- resent the French working class. Al- fragile majorities, France’s presidential
racy are also worrisome. In February prosecu- prochement more difficult by giving away most 65% of blue-collar voters sup- system is relatively stable. Barring an
tors arrested his most prominent critic, Senator too much at the start—a violation of “Art of ported Ms. Le Pen and Mr. Mélenchon. exceptional circumstance, the presi-
Leila de Lima, on transparently political drugs the Deal” best practice. A White House visit Culturally, they all bear witness to dent is virtually assured to serve his
charges. She is being held without bail in a po- is prestigious, and Mr. Duterte didn’t even what political scientist Jan Zielonka entire five-year term. Mr. Macron
defined as the “counterrevolutionary could use that time at the Elysée to
lice camp, and the Solicitor General threatened ask for it. He promptly seized the opportu-
insurgence,” or the rejection of the push for big reforms.
to arrest another troublesome Senator. nity to grandstand at Mr. Trump’s expense, post Cold war, liberal revolution. Their But what kind of reforms, exactly? If
Mr. Duterte has threatened journalists proclaiming himself so busy he might not supporters are hostile to free markets Mr. Macron wins the presidency, he
with assassination and suggested he may im- find the time. and dislike European integration and should make the economy more com-
pose martial law and suspend local elections. As a candidate Mr. Trump promised to talk trade liberalization. More broadly, they petitive by reforming France’s gener-
Bongbong Marcos, son of the late dictator to America’s adversaries, which is fine in stand opposed to globalization and lib- ous welfare state, while also showing
Ferdinand Marcos, teamed up with the Presi- theory. But a President needs to prepare for re- eral immigration policies. that he’s ready to fight to protect
dent and contributed the power of his patron- alpolitik engagement. Face time with a U.S. Mr. Mélenchon’s evolving stance on French workers. That means putting an
age network. Mr. Duterte is trying to amend President is a reward to be doled out carefully, migration illustrates this shift in end to unregulated movement of work-
the Constitution to strengthen the Presidency and the U.S. should get something in return. French politics. While his 2012 presi- ers from Central and Eastern European
dential campaign focused on a tradi- countries to France, and advocating in
tional left-wing, multicultural vision of Brussels to deny China “market econ-
Barack Obama, Capitalist society based on the concept of diver-
sity, in the months before this year’s
omy” status, which would open
France’s domestic economy further to

P
election Mr. Mélenchon developed a Chinese competition and disrupt the
oor Barack Obama. The fellow governs touch with “the lived experiences of most more nuanced approach. In July, he ac- country’s industrial base.
for eight long years as the most progres- Americans.” The left-wing press is fretting that cused foreign workers posted to France’s growing dislike for globali-
sive President since LBJ, and now his the former President is either tone-deaf or France of stealing local workers’ zation can’t be discounted. Mr. Macron
former left-wing fans are up- cashing in on his former of- “bread.” In his latest book, roughly should pay heed, otherwise he’ll find
set that he wants to enjoy the Let the man make a fice, or some other quality translated as “The Rebel’s Choice,” he himself the wrong man to lead the
fruits of capitalism as a pri- buck, as long as he pays they usually associate with states “if we don’t want people coming country during turbulent times. That
vate citizen. greedy Republicans. in, it is better if they don’t leave” their would be very bad news for France,
Our liberal friends are dis- the top marginal rate. But why begrudge the man country. and for Europe too.
Thus the French could soon face a
appointed—the tone is more his right to make a living? Mr. thorny contradiction: They may elect a Mr. Ronchi is a lecturer in political
sorrow than anger—that the Obama is a relatively young liberal, pro-European, pro-globaliza- science at the Institut d’Etudes Poli-
former progressive hero has decided to give man with two daughters to put through college, tion president to govern a country tiques de Paris.
speeches for big money. One reported payday and speech-making is something he knows how
was $400,000 from the Wall Street firm Cantor to do. There’s also some rough justice in Mr.
Fitzgerald, and there may be more. Obama experiencing the bite of the high tax
Senator and progressive ethicist Elizabeth rates he imposed on everyone else. If he wants
Warren took a shot at Mr. Obama in an inter- to appease his critics, Mr. Obama can always
Every Senator Agrees the
view with the Guardian published Monday, say- write a check to the U.S. Treasury for whatever
ing that he and other politicians are out of he saves from the coming Republican tax cut. U.N. Must Change
By Chris Coons Perhaps most troubling is the Hu-

Pre-Existing Confusion And Marco Rubio man Rights Council. Charged with

I
drawing the world’s attention to gross

I
t’s rare, especially these days, for all human-rights violations, its members
nsurance coverage for pre-existing health Community rating and guaranteed issue 100 U.S. Senators—from Bernie include some of the world’s worst hu-
conditions can be confusing, as President also punish the sick by degrading quality. Sanders to Ted Cruz, from Elizabeth man-rights violators, who devote far
Trump and a journalist showed in a televi- When insurers can profit by being the best Warren to Mitch McConnell—to agree too much time to baseless attacks
sion interview over the week- plan for, say, cancer or dia- on something. But the scourge of anti- against the Jewish state. The HRC even
end. Allow us to explain how Here’s how the House betes, they invest in such Israel bias at the United Nations is maintains a permanent item on its
the GOP reform would work such an issue. Last week, every senator agenda targeting Israel—Agenda Item
in practice and why pre-exist-
health reform will cover care. When both the healthy
and sick pay the same rates, signed our letter to Secretary-General 7. No actual human-rights violator is
high-risk patients. António Guterres, urging him to im- targeted in this way.
ing conditions have been ex- the incentive is to load up on
prove the U.N.’s treatment of Israel and Speaking recently before the HRC in
aggerated as a political prob- healthier people and dis- eliminate anti-Semitism in all its forms. Geneva, Erin Barclay, the U.S. deputy
lem. courage people with expen- While the U.N. has achieved some assistant secretary of state for interna-
Mr. Trump told CBS’s John Dickerson that sive ailments or chronic conditions from en- important successes since its founding tional organization affairs, criticized
“I watch some of the news reports, which are rolling by using higher copays, narrow 70 years ago, too many of its member the council’s anti-Israel focus as “unfair
so unfair, and they say we don’t cover pre-ex- provider networks or tiered prescription states and agencies use the world body and unbalanced,” noting that its “ob-
isting conditions, we cover it beautifully.” Mr. drug formularies. as a vehicle for targeting Israel rather session with Israel . . . is the largest
Dickerson seemed surprised: “Okay. Well, In a recent study of the Affordable Care Act, than as a forum committed to advanc- threat to the council’s credibility” and
that’s a development, sir. So you’re saying it’s Daniel Prinz and Timothy J. Layton of Harvard ing peace and human rights. This en- “limits the good we can accomplish by
going to be pre-existing to everybody?” Mr. and Michael Geruso of University of Texas- courages and supports the broader making a mockery of this council.”
Trump said the House bill had “evolved” but Austin conclude that insurers are using benefit scourge of anti-Semitism, and distracts
key U.N. entities from their original
as usual didn’t explain how. designs to screen for unprofitable consumers. missions. It’s past time for the U.S. to
House conservatives rebelled over the orig- The result is that people with expensive condi- As both the U.N.’s principal founding
inal version of the American Health Care Act, tions cannot obtain adequate coverage. member and its largest financial con-
stop tolerating Turtle Bay’s
which only partially deregulated insurance Pre-existing conditions are an understand- tributor, the U.S. must insist on real re- pervasive anti-Israel bias.
markets. The bill maintained the rule known ably emotional issue, because people fear los- forms. We in Congress have a responsi-
as guaranteed issue, which requires insurers ing their plan or a financial catastrophe if they bility to conduct rigorous oversight of
to cover all applicants regardless of medical develop a serious health problem. But only U.S. engagement at the U.N. and its use The HRC should be the premier in-
history. It also relaxed community rating, about 4% of the population under age 65 is of our citizens’ tax dollars. We com- ternational body addressing the many
which limits how much premiums can vary high risk. ObamaCare’s Pre-Existing Condi- mend Ambassador Nikki Haley for stat- pressing human-rights challenges of
among beneficiaries. tions Insurance Plan was created from 2010 to ing that “the U.N.’s anti-Israel bias . . . our time in countries such as China,
is long overdue for change.” In another Cuba, North Korea, Syria, Russia,
The media and the left thus claim that con- 2014 as a transition until the entitlement de-
hopeful sign, Mr. Guterres recently dis- South Sudan and Venezuela. We
servatives want to allow insurers to charge buted nationwide: Anyone could sign up for avowed an anti-Israel report by the therefore urge specific reforms to end
sick people more, and some conservatives heavily subsidized coverage if they were de- U.N. Economic and Social Commission the HRC’s imbalanced focus on Israel,
agree, which spooks the moderates. But the nied in the private market. Enrollment topped for Western Asia and demanded that it including the elimination of Agenda
latest compromise between conservatives and out at merely 115,000 people in 2013. be withdrawn. Item 7 and a competitive admission
centrists doesn’t repeal guaranteed issue or This debate is also distorted by a misunder- Still, the U.N. continues to fund and process in order to broaden and bet-
community rating. It keeps these regulations standing of health risks. The actuarial proba- maintain many standing committees ter balance membership on the coun-
as the default baseline, and states could apply bility that a healthy person will become sick that serve no purpose other than to at- cil.
for a federal waiver if they want to pursue is already priced into premiums, meaning it is tack Israel and inspire the anti-Israel In his April 25, 1945, address to the
other regulatory relief. true insurance for unknown future health out- boycott, sanctions and divestment United Nations, President Harry S. Tru-
But the waivers aren’t a license to leave comes. People with pre-existing conditions movement. These committees must be man challenged the authors of the U.N.
eliminated or reformed. Charter to create an organization
cancer survivors without insurance. States can don’t need insurance—they need help paying
While the U.N. Educational, Scien- rooted in lofty humanitarian principles,
only receive a waiver if they avail themselves for expensive treatment that is already known. tific and Cultural Organization does dedicated to the benefit of all mankind,
of the bill’s $100 billion fund to set up high- High-risk pools are a fairer and more equi- important work on Holocaust education and capable of achieving “a just and
risk pools. These state-based programs, which table solution to this social problem, rather and preserving world heritage sites, lasting peace.”
were run in 35 states until they were pre- than hiding the cost by forcing other people some member states persist in pushing For too long the world body has
empted by ObamaCare, subsidize coverage for to pay premiums that are artificially higher measures to target Israel and deny fallen far short of those ideals. In order
older and sicker patients. This helps these in- than the value of the product. The waivers also Jewish and Christian ties to Jerusalem. for it to be more effective in advancing
dividuals and keeps coverage cheaper for ev- include protections for people who renew con- Unesco member states must under- peace and human rights around the
eryone else. tinuous coverage from major premium in- stand that these actions only under- world, America must remain vigilant.
Why might a Governor prefer such an ar- creases if they become ill. mine the credibility of their organiza- We stand ready to lead sustained bi-
rangement over the ObamaCare status quo? tion. partisan efforts in Congress and with
Liberals are inflating the pre-existing con-
The U.N. Relief and Works Agency our international partners to eliminate
Well, the law’s price controls are a raw deal for ditions panic with images of patients pushed for Palestine Refugees in the Near East the U.N.’s anti-Israel bias, and to fight
most consumers, which leads to a cycle of ris- out to sea on ice floes, but the GOP plan will has faced troubling allegations of incit- anti-Semitism in all its forms.
ing premiums and falling enrollment. Average ensure everyone can get the care they need. ing violence against Israelis and aiding
premiums rose by 40% or more in 11 states this Republicans can win this argument, but first Hamas. If it does not cease these activ- Mr. Coons, a Delaware Democrat,
year, and insurance markets in states like Ten- they need to join the debate and explain their ities, it risks losing support of U.S. law- and Mr. Rubio, a Florida Republican,
nessee, Kentucky and Minnesota are in crisis. ideas. makers. are U.S. senators.
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
THE WALL STREET JOURNAL.
‘Nationalist’ Shouldn’t Be a Dirty Word
By Walter Russell Mead
I
f Donald Trump were a lib-
eral Democrat, some of the
media’s descriptions of
“chaos” and “disarray” in the
White House probably would
be replaced with stories about “cre-
ative tension” among a “team of ri-
vals.” As it is, the struggle between
“nationalists” like Steve Bannon
and “globalists” like Gary Cohn is
characterized in near-apocalyptic
terms. Yet as Mr. Trump told The
Wall Street Journal last week, “I’m
a nationalist and a globalist.” That
is good news: Mr. Trump and the
Republican Party should be weaving
nationalist and globalist themes to-
gether rather than picking them
apart.
Trump will be successful
if he puts U.S. interests
first—while still helping
to maintain global order.
Nationalism—the sense that
Americans are bound together into
a single people with a common des-
tiny—is a noble and necessary force
without which American democracy
would fail. A nationalist and patri-
otic elite produces leaders like
George Washington, who aim to
promote the well-being of the
country they love. An unpatriotic
and antinationalist elite produces
people who feather their nests
without regard to the common
good.
Mr. Trump is president in large
part because millions of Ameri-
cans, rightly or wrongly, believed
Spare the ‘Dreamers’ a Nightmare by According Them Due Process
By Theodore J. Boutrous Jr.
And Jesse Gabriel
P
resident Trump has adopted a
sympathetic tone toward the
young undocumented immi-
grants known as Dreamers, who
were brought to America as minors.
The Obama administration offered
them renewable two-year protec-
tion from deportation under a pol-
icy called Deferred Action for Child-
hood Arrivals, or DACA. Asked in
February about the policy’s future,
Mr. Trump pledged to “show great
heart” in dealing with these “in-
credible kids.” Last month he de-
clared that Dreamers should “rest
easy.” For his part, Homeland Secu-
rity Secretary John Kelly has char-
acterized DACA as “a commitment”
that must be honored.
But the administration is send-
ing mixed signals. Attorney General
Jeff Sessions, asked about Mr.
Trump’s “rest easy” remarks, re-
sisted the notion. “Well, we’ll see,”
he said. “I believe that everyone
that enters the country unlawfully
is subject to being deported.”
Emboldened and newly aggres-
sive agents of Immigration and
Customs Enforcement seem to have
their own agenda, too. In February,
ICE arrested our client, a young fa-
ther and two-time DACA recipient
Guess it depends on
what you mean by a
“multitrillion-dollar
shift.”
On Friday the
New York Times
used it this way in
MAIN
the lead of a front-
STREET
page story about
By William
Donald Trump’s
McGurn
new tax bid: “Presi-
dent Trump’s pro-
posal to slash individual and busi-
ness taxes and erase a surtax that
funds the Affordable Care Act
would amount to a multitrillion-
dollar shift from federal coffers to
America’s richest families and their
heirs . . .”
PUBLISHED SINCE 1889 BY DOW JONES & COMPANY
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that large sections of their coun-
try’s elite were no longer national-
ist. Flawed he may be, but the
president bears an important mes-
sage, and Trump-hating elites have
only themselves to blame for his
ascendancy. A cosmopolitan and
technocratic political class that
neither speaks the language nor
feels the pull of nationalist solidar-
ity cannot successfully lead a dem-
ocratic society.
The president symbolized his na-
tionalist commitment by hanging a
portrait of Andrew Jackson in a
place of honor in the Oval Office.
Now Mr. Trump must stay true to
that commitment or he will lose his
political base and American politics
will spin even further off balance.
But life is rarely simple. Jacksonian
means will not always achieve
Jacksonian goals. Sometimes, they
even get in the way.
Jackson learned this when his
populist fight against the Second
Bank of the United States ulti-
mately led to a depression that
turned the country over to his
hated Whig rivals. As Mr. Trump
comes to grips with the tough in-
ternational economic reality, he is
realizing that not everything the
Jacksonians think they want will
actually help them. The president
has already discovered that rip-
ping up the North American Free
Trade Agreement won’t help the
middle-class voters who put him in
office.
Jacksonian voters don’t want
North Korea to have the ability to
threaten the U.S. with nuclear weap-
ons. They also don’t want a second
Korean War. Reaching the best out-
come on Korea could mean giving
China a better deal on trade than
many Trump voters would desire.
named Daniel Ramirez Medina. He
was detained for more than six
weeks and is now fighting deporta-
tion. The agency detained a 22-
year-old Mississippi woman, who
was in the process of renewing her
DACA status, after she spoke out
against the detention of her father
and brother. A 23-year-old man
from California with a cognitive
disability is suing the government,
saying federal agents summarily
deported him mere hours after he
was detained—even though he had
twice been granted protection un-
der DACA.
DACA began in 2012, when then-
Homeland Security Secretary Janet
Napolitano, at President Obama’s
direction, issued a policy memoran-
dum to address noncitizen “young
people who were brought to this
country as children and know only
this country as home.” It was
framed as an exercise in “prosecu-
torial discretion,” deferring action
against Dreamers and allowing
them to live and work in the U.S.
The policy requires them to pay a
fee, provide the government with
sensitive personal information, and
pass a rigorous background exami-
nation. Mindful of Congress’s role,
the Napolitano memorandum made
clear that DACA did not purport to
establish a new substantive right
It’s the Prosperity, Stupid
This is a curious way to put it, as
if the country’s millionaires and bil-
lionaires are readying to raid the
American people of their money. Be-
cause before there can be any mul-
titrillion dollar shift out of U.S. cof-
fers, there has to be a multitrillion
dollar shift into those coffers.
Wouldn’t it have been more accurate
to explain that if the federal coffers
won’t be as full in the Trump years,
it will be because people will get to
keep more of their own money?
In the sour dynamic of the mod-
ern Beltway, alas, any bid aimed at
allowing more Americans to keep
more of what they earn will inevita-
bly be presented through the Chuck
Schumer filter of the rich robbing
Robert Thomson
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OPINION
President Trump discusses an executive order on trade, March 31, in front of a
portrait of President Andrew Jackson, who served 1829-37.
Populists like to rail against globali-
zation and world order. Yet the se-
curity and prosperity of the Ameri-
can people depend on an intricate
web of military, diplomatic, political
and economic arrangements that an
American president must manage
and conserve.
Mr. Trump is learning that some
of the core goals of his Jacksonian
program can be realized only by
judiciously employing the global
military, diplomatic and economic
statesmanship associated with Al-
exander Hamilton. Bringing those
two visions into alignment isn’t
easy. Up until the Civil War, the
or immigration status, since those
were matters for the legislative
branch.
As the website of Citizenship
and Immigration Services indicates,
however, a person who is deemed
to qualify for DACA is considered
“to be lawfully present” in the U.S.
and protected from deportation.
The president pledged
to ‘show great heart.’
But his administration
is sending mixed signals.
DACA has enabled nearly 800,000
young people to obtain work per-
mits, attend universities, open bank
accounts, start businesses, buy
homes and cars, and—for Luis Cor-
tes Romero, our co-counsel in the
Ramirez case—graduate from law
school and pass the bar.
Mr. Ramirez qualified for DACA
in 2014 and then again in 2016,
passing background checks both
times. Nothing had changed when
agents arrested him on the morn-
ing of Feb. 10, as he slept in his fa-
ther’s house. Nevertheless, ICE re-
voked his DACA status and work
permit and locked him up.
the poor. As if on cue, the Senate
minority leader emerged on Sunday
to characterize the Trump plan as
“massive tax cuts for the very
wealthy, crumbs, at best, for every-
one else.”
Which leads to a temptation the
Trump administration would be
wise to resist. The impulse will be
to make the argument that theirs is
a tax cut for populists and not plu-
tocrats on the basis of provisions
such as the doubling of the standard
deduction.
Let us stipulate that any time
Americans get to keep more of what
they’ve worked for, and in a way
that makes filing taxes easier, this
columnist cheers. But if the only
benefit to middle- and working-
class Americans from the proposed
Trump cuts is a lower tax bill, the
White House loses the argument.
Because the promise here is some-
thing much larger than just a lower
tax burden. It’s a return to a boom-
ing American economy, the best way
to fatten employee paychecks and
open new opportunities for upward
mobility.
True, Republicans start out with a
rhetorical handicap here. The English
language has few phrases as boring
as “economic growth.” Even so, the
economic reality is that nothing de-
livers the extraordinary punch—es-
pecially for ordinary Americans—
that sustained economic growth
does.
When Treasury Secretary Steven
Mnuchin presented the administra-
tion’s tax plan, he argued that its
primary purpose is to get the econ-
omy growing again. He’s right, and
that’s how he should sell it.
BLOOMBERG
American party system revolved
around the rivalry of the Jackso-
nian Democrats with the Hamilto-
nian Whigs. Abraham Lincoln fused
Jacksonian unionism with Henry
Clay’s Hamiltonian vision when he
created the modern Republican
Party. Theodore Roosevelt and
Ronald Reagan revitalized the
party of their times by returning
to the Jacksonian-Hamiltonian co-
alition that made the old party
grand.
The future of the Trump adminis-
tration and the Republican Party
largely depend on whether the pres-
ident and his allies can return to
Our legal team immediately
filed a habeas corpus petition, ask-
ing the federal district court in Se-
attle to set Mr. Ramirez free. On
March 28 we were able to per-
suade an immigration judge to re-
lease him on bond as he fights de-
portation.
Last week we filed an amended
complaint in federal court. It ar-
gues that the summary revocation
of Mr. Ramirez’s DACA status was
contrary to the government’s own
established procedures, which re-
quire that Dreamers be provided
with a “Notice of Intent to Termi-
nate” and “33 days to file a brief or
statement contesting” such action.
As the Supreme Court explained in
another immigration case, U.S. ex
rel. Accardi v. Shaughnessy (1954),
federal agencies must follow their
own rules.
We also seek a judicial declara-
tion that DACA status cannot be re-
voked—and that DACA recipients
cannot be arrested, detained and
deported—without procedural safe-
guards such as notice and an oppor-
tunity to be heard. The due-process
rights enshrined in the Constitution,
not to mention fundamental fair-
ness, require no less.
We are not arguing that anyone
has a substantive right to DACA,
or that the policy creates a new
John Cochrane, an economist at
Stanford’s Hoover Institution, calls
sclerotic growth “the overriding eco-
nomic issue of our time.” For the
last half of the 20th century, he
notes, the U.S. economy grew at an
average rate of 3.5%. This translated
into real income per person in the
U.S. rising from $16,000 to
$50,000—a yuge improvement for
ordinary Americans.
The real debate is about
making dreams come true,
not just lowering taxes.
Since 2009, unfortunately, the
economy has been averaging about
2% growth per year, which some call
the new normal. In a back-of-the-en-
velope calculation last year made at
this columnist’s request, Mr. Co-
chrane reckoned that for a worker
making $50,000, 2% growth means
his income would rise to $54,400
eight years from now. But if we
could get the economy growing at
3%, his income would rise to
$58,675. Remember, too, these gains
are compounded every year.
Still, the case for growth is not
primarily about numbers. It’s about
the American Dream and the next
generation doing better than the
one before: a new home in a good
neighborhood, college, paychecks
that go further, maybe even the
wherewithal for some wage slave to
make a go of starting up her own
business.
Democrats never talk about eco-
nomic growth because their model
Wednesday, May 3, 2017 | A11
these roots. The elements of fusion
are there. While Jacksonians are
skeptical of corporate power and in-
ternational institutions, they like
economic growth that benefits the
middle class, and they strongly be-
lieve in an America that stands up
for itself and its allies. They are less
worried about budget deficits than
they are about a strong economy. If
the tide is lifting the rowboats, they
do not care all that much that the
yachts are rising too.
For the coalition to work, Hamil-
tonians need to realize that the
health and cohesion of American
society is fundamental to the world
order that allows corporations and
financial firms to operate so profit-
ably in the global market. In other
words, Peoria matters much more
than Davos. It was American power
and will that built the present
world order and ultimately must
sustain it. A divided society with
an eviscerated middle class cannot
provide the stable, coherent leader-
ship that is required.
The U.S. must be simultaneously
a nationalist power, focused on the
prosperity and security of its own
people, and a globalist power work-
ing to secure the foundations of in-
ternational order that Americans
need. Mr. Trump appears to under-
stand this truth better than many
of his most vituperative critics. The
task now confronting the president
and his team is to develop and exe-
cute a national strategy based on
these insights. Nothing in today’s
world is harder than this, and noth-
ing is more essential.
Mr. Mead is a fellow at the Hud-
son Institute, a professor of foreign
affairs at Bard College, and editor
at large of the American Interest.
immigration status. As the Napoli-
tano memorandum recognizes,
only Congress can establish those
things.
Rather, we are making a narrow
but important claim: that the gov-
ernment, after coaxing these young
people out of the shadows, deeming
them “lawfully present,” and then
promising not to arrest, detain or
deport them if they follow the
rules, cannot turn around and do
just that. The executive branch
should be held to the promise it
has made. In Raley v. Ohio (1959),
the Supreme Court condemned this
type of bait-and-switch as “the
most indefensible sort of entrap-
ment by the State.”
Mr. Sessions’s Justice Depart-
ment thus far has defended this
ICE entrapment as authorized and
appropriate. It therefore seems
likely that, unless and until Presi-
dent Trump directs the administra-
tion to put his soothing words into
action, it is up to the federal
courts, applying the Constitution,
to ensure that Dreamers can “rest
easy.”
Mr. Boutrous is global co-chair-
man of the litigation group at the
law firm of Gibson Dunn & Crutcher
LLP and Mr. Gabriel is a senior as-
sociate at the firm.
is the “Life of Julia,” the Obama-era
cartoon showing a woman who at
every stage in her life requires gov-
ernment to get ahead. The advan-
tage of making the tax fight an ar-
gument about growth (as opposed
to focusing on the tax relief) is that
it dovetails with other Republican
initiatives, especially the liberation
of American know-how and possibil-
ity through deregulation.
Here’s something else. A prosper-
ity-based argument would also help
Mr. Trump appeal beyond his white
working-class base. In his book
“Coming Apart,” political scientist
Charles Murray notes that the dys-
functions associated with poor black
populations in inner cities—bad
schools, broken families, govern-
ment dependency, lack of economic
opportunity—also characterize
many poor white communities.
The flip side of the Murray argu-
ment is this: Measures that would
open opportunities for the white
working class would likely help lift
others in the same economic boat.
Is it any coincidence, for example,
that when Joel Kotkin’s Center for
Opportunity Urbanism looked to
the cities where African-Americans
are doing best economically, it’s not
the progressive North that domi-
nates. It’s the growing South.
So let the Times and Mr.
Schumer holler about emptying fed-
eral coffers and giveaways to the
rich. If the Trump White House
hopes to win this argument, it
starts with making this debate all
about dreams—and the economic
growth that can turn them into re-
ality.
Write to mcgurn@wsj.com.
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A12 | Wednesday, May 3, 2017 THE WALL STREET JOURNAL.

LIFE & ARTS

MY RIDE

The Sneaky Horsepower of a ‘Derelict’

Tim Vest, 52, a JetBlue pilot and co-
owner of a Ford dealership from Livermore,
Calif., on his 1948 Buick “Derelict,” as told
to A.J. Baime.
The coolest thing about the Derelict is
the way it makes people smile. Old people
love it because they remember cars from
1948. Young people love it because it re-
minds them of the movie “Cars.” Hot rod-
ders love it because they quickly figure out
what it is—something completely different
from what it appears.
Derelicts are the dream children of a cus-
tom-car builder from Los Angeles named Jon-
athan Ward, whose company is called Icon.
From the outside, the Derelict looks like an
old machine with tons of character. Under-
neath, it is fully modern. Ward has made

ANGELA DECENZO FOR THE WALL STREET JOURNAL

fewer than a dozen, and each is unique.
He had built a Derelict station wagon for
himself, and I loved the idea. He found a
1948 Buick Super 8 on Craigslist, and in
2013, I bought it and had it shipped to his
shop. The Buick had not been driven since
1959, and you could see all the patina, the
dents and rust, a stain on the fender where
someone had left a rag sitting for decades.
The build took two years. Ward took the
body off and scanned it, then had a custom
frame made by Art Morrison, a chassis
builder. The brakes are Wilwood, the steer-
ing is state-of-the-art, and
we got high-performance
tires. The motor was an im-
portant decision. I chose an
LS9 Corvette engine, tuned
so it puts out over 650
horsepower. We also had a
new stereo tucked into the
dash under the old one.
Back-up camera, navigation,
air-conditioning—everything
you’d find in a new car.
While the Derelict is not
cheap (mine cost well into
the six figures), it drives
like a new BMW 7 Series. I
can motor down Highway 17
into Santa Cruz with two
fingers on the wheel. When
I shoot past a car on those
windy curves, I love to see
the expression on the
driver’s face. He’s thinking: What the hell is Tim Vest with his Derelict in Livermore, Calif.
that? Outside, it’s a beat-up 1948 Buick Super 8.
It’s a Buick Derelict—one of a kind. Underneath the body lies powerful modern
machinery, including a V-8 Corvette engine,
middle right. The car has its original steering
Contact A.J. Baime at wheel, above, but a modern stereo, rear camera,
Facebook.com/ajbaime. navigation and other electronic goodies.

Weather The WSJ Daily Crossword | Edited by Mike Shenk

Shown are today’s noon positions of weather systems and precipitation. Temperature bands are highs for the day.
-15 1 2 3 4 5 6 7 8 9 10 11 12 13 61 It’s totally not 22 Wolfish look
-10 gross
Riga -5 14 15 16 23 They have teeth
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w oscow
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17 18 19 24 Lace tip
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10 20 21 22 25 Jousting feint?
D bli
Dublin 15 Down
li
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Warsaw 25 27 28 fish 28 Alaska Territory
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e
Kiev
29 30 31 32 33 34 2 Dep.’s
Pra
Pr
Prague 35
counterpart 31 Hot room
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Paris Munich
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35 36 37 38
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V Warm 3 It comes in black, 33 Something to
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d p white, green and champion
Geneva 39 40 41 42
Cold
red varieties 34 Flurry
Milan Bucharest
h 43 44 45 46
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4 Africa’s most 36 Roadies’
47 48 49 populous
Showers documents
Rome t b
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Madrid
d id Rain 37 Barista’s
52 53 54 55 56 57
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b Aphrodite
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Ath
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61 62 63 42 Many
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b sportswear
Ice PREPOSITION PLAYERS | company 44 Service centers?

Global Forecasts Today Tomorrow Today Tomorrow By Alex Eaton-Salners 8 ___ mater (brain 46 Storm
City Hi Lo W Hi Lo W City Hi Lo W Hi Lo W membrane)
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t...t’storms; r...rain; sf...snow flurries; sn...snow; i...ice Hanoi 34 25 s 31 23 c Paris 14 7 sh 19 7 sh perhaps 9 Superhero film
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Today Tomorrow Hong Kong 29 24 t 29 24 t Phoenix 37 22 s 39 23 s 7 FaceTime device 27 Selfishness weapon of choice chaser
City Hi Lo W Hi Lo W Honolulu 29 22 s 29 23 s Pittsburgh 16 7 pc 16 10 r 10 Person with a
28 Fourteen-line 45 Mass producer? 49 Pewter
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Anchorage 11 4 pc 10 2 c Istanbul 23 13 s 22 13 s Portland, Ore. 27 15 pc 29 12 pc work component
place 47 Shake option
Athens 27 16 s 27 16 s Jakarta 32 25 t 32 24 t Rio de Janeiro 27 19 s 27 20 s 11 Area full of
Atlanta 28 16 pc 20 10 t Johannesburg 21 8 c 22 9 pc Riyadh 39 23 pc 40 24 s 29 Jessica of “Sin 51 Funny fellows
14 Frozen food 49 Foundation illegally parked
Baghdad 36 19 s 35 20 pc Kansas City 13 6 sh 19 7 pc Rome 20 10 pc 20 9 pc brand City” cars?
figure 54 Hauler’s unit
Baltimore 19 8 s 18 13 r Las Vegas 33 22 s 36 22 s Salt Lake City 20 8 pc 24 12 s
Bangkok 37 27 t 37 27 c Lima 24 20 pc 24 19 pc San Diego 23 16 pc 23 16 pc 30 Set sibling
15 Enthusiast’s pub 50 Bring out 12 Hammerin’ Hank 55 Squeeze (out)
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Cairo 30 18 s 30 18 s Milan 17 10 t 19 8 t Shanghai 23 19 c 25 16 sh 36 Move off in J O B
S S T O P T E A C H
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20 Over C O D
A I C E R C O T T A
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P I N T O U C H R I P
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Charlotte 27 15 s 23 11 t Montreal 12 1 c 15 6 s Sydney 19 15 pc 20 14 pc 21 “Better to reign
Chicago 14 6 pc 13 5 r Moscow 13 3 pc 10 1 c Taipei 30 23 t 31 24 pc 38 Salary ceiling whine S N A R L B I T C O I N
in Hell, than M A N T A AM A T E G O S
Dallas 25 11 r 23 11 s Mumbai 33 25 pc 33 25 s Tehran 27 17 pc 27 16 c O P T Y AWA X I S E N E
Denver 14 2 c 20 5 pc Nashville 26 15 c 19 8 t Tel Aviv 24 15 s 24 15 s serve in Heaven” 39 Manner 59 Leisurely run G A I T E D G E H E N C E
Detroit 16 5 pc 9 6 r New Delhi 39 25 c 40 25 pc Tokyo 21 15 pc 21 15 pc writer C R U I S E D R A T E D
Dubai 39 29 s 39 30 s New Orleans 27 18 t 22 13 t Toronto 14 1 pc 10 6 r
41 Maui music 60 Arthur’s foster P L A N O B U S
23 God’s messenger makers brother S R I F U L L O F B E A N S
Dublin 13 8 pc 13 6 pc New York City 17 8 s 16 10 pc Vancouver 16 10 r 19 12 pc A AM C O E A R L O V A L
Edinburgh 14 6 pc 14 5 pc Omaha 17 7 sh 20 6 s Washington, D.C. 21 11 s 19 15 r S T A H L A B B A F E T A
Solve this puzzle online and discuss it at WSJ.com/Puzzles.
s

Frankfurt 17 9 t 16 9 t Orlando 31 19 pc 32 18 pc Zurich 13 4 r 16 5 t H E X E D P S S T F R O G

©2017 Dow Jones & Co. Inc. All rights reserved. 6DJ4790

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BUSINESS & FINANCE
© 2017 Dow Jones & Company. All Rights Reserved.
Euro vs. Dollar 1.0913 À 0.12%
U.S. Auto Sales Cooled in April
BY ADRIENNE ROBERTS
AND MIKE COLIAS
Detroit’s auto makers sig-
naled their hot streak is rap-
idly cooling, with demand sur-
prisingly sluggish for the
trucks and SUVs that have
fueled record profits for do-
mestic players.
General Motors Co. and
Ford Motor Co. reported de-
clines in April of 5.8% and
7.1%, respectively, compared
with the same month last year.
Fiat Chrysler Automobiles
NV reported a 7% decline, as
sales at its Jeep Brand contin-
ued to tumble.
Another troubling sign: It is
taking dealers far longer to
sell off inventory, resulting in
a glut of unsold cars and
trucks. GM, the No. 1 U.S. auto
maker, has nearly one million
vehicles of unsold units on
dealer lots.
Auto makers sold 1.43 mil-
HEARD ON
THE STREET
By Stephen Wilmot
Renault
And Future
Of French
Capitalism
French
presidential
favorite Em-
manuel Ma-
cron has
pitched him-
self as a political outsider in-
tent on modernizing the
economy. But his record of
intervention at the country’s
biggest car maker should be
a gut check on exactly how
far he would go to reform
the French state’s role in pri-
vate enterprise.
For much of 2015, Renault
was engaged in a public bat-
tle with Mr. Macron, then
economy minister to social-
ist President François Hol-
lande. The tensions centered
on the government’s share-
holding, which Mr. Macron
raised to almost 20%, from
the 15% level agreed in a
2002 alliance with Nissan,
Renault’s Japanese peer and
other major shareholder.
The move came amid
union and media worries that
Renault was being “Nissani-
zed.” Also at play: Mr. Ma-
cron bought the extra stock
to stop Renault from getting
around a law he supported
giving longer-term sharehold-
ers in France double voting
rights. Renault boss Carlos
Ghosn thought the law would
destabilize the Nissan alli-
ance, particularly since Nis-
san renounced its voting
rights as part of the 2002
cross-shareholding deal.
The two men announced a
truce in December 2015, but
Please see HEARD page B2
INSIDE
OIL GIANT BP
SWINGS TO
A PROFIT
BUSINESS NEWS, B3
HOW YOUNG
BOSSES CAN
GAIN TRUST
MANAGEMENT, B5
TECHNOLOGY: MICROSOFT BOOSTS ITS LAPTOP OFFERINGS B4
FTSE 100 7250.05 À 0.64%
lion vehicles in the U.S. in
April, down 4.7% from a year
earlier, according to Auto-
data Corp.
Detroit is hoping the sum-
mer sales season will get it
out of the rut, aided by
plenty of discounts, low gas-
oline prices and broad eco-
nomic strength.
The U.S. car industry has
been on a winning streak since
bailouts rescued GM and other
auto companies in 2009. After
seven consecutive annual sales
increases, including two con-
secutive record performances,
demand has cooled through
four months of 2017 despite
generous discounts.
Discounts are nearing an
average of $4,000 per car or
truck sold, according to J.D.
Power, denting the favorable
impact that selling a richer
mix of pricier Ford F-150s or
Cadillac Escalades can deliver.
GM, which has 17% market
Jared Kushner, Donald Trump’s son-in-law and a senior adviser, didn’t identify a stake in startup Cadre on a financial-disclosure form.
Kushner Didn’t Disclose Tech Stake
Investments show ties
to Goldman Sachs and
George Soros, as well
as a number of loans
Jared Kushner, the U.S.
president’s son-in-law and se-
nior adviser, didn’t identify on
his government financial-dis-
closure form that he is cur-
By Jean Eaglesham,
Juliet Chung
and Lisa Schwartz
rently a part-owner of a real-
estate finance startup and has
a number of loans from banks
on properties he co-owns, ac-
cording to securities filings.
Investors See Debate
In France as Crucial
BY JON SINDREU
Is the rise of populism in
Europe fading or is there
space for a comeback? Many
investors expect the French
presidential debate Wednes-
day to provide some answers.
Far-right candidate Marine
Le Pen’s few remaining
chances to clinch a last-min-
ute victory in the second
round of the French presiden-
tial election Sunday, investors
say, will depend on her televi-
sion performance. While re-
search suggests the impact of
debates is often limited,
money managers see it as a
potential pitfall for pro-busi-
ness candidate Emmanuel Ma-
cron, who is leading comfort-
ably in the polls but remains
politically inexperienced.
“That debate will be key,”
THE WALL STREET JOURNAL.
Gold 1255.10 À 0.14%
After a long run of strong sales, auto makers are now contending
with sluggish demand and rising inventories in the U.S.
share, will be shutting down
some factories later this year
to ready assembly lines for
new models. Executives say a
lack of new supply in the sec-
ond half, along with possible
job growth, wage increases
Mr. Kushner’s stake in
Cadre—a tech startup that pairs
investors with big real-estate
projects—means the senior
White House official is currently
a business partner of Goldman
Sachs Group Inc. and billion-
aires including George Soros
and Peter Thiel, according to
people close to the company.
The Cadre stake is one of
many interests—and ties to
large financial institutions—
that Mr. Kushner didn’t identify
on his disclosure form, accord-
ing to a Wall Street Journal re-
view of securities and other fil-
ings. Others include loans
totaling at least $1 billion, from
more than 20 lenders, to prop-
erties and companies part-
owned by Mr. Kushner, the
said Holly MacDonald, chief
investment strategist at
Bessemer Trust, a New York-
based wealth manager with
more than $100 billion under
its wing. Mr. “Macron is
somewhat of an untested can-
didate.”
Mr. Macron managed to
hold his own against Ms. Le
Pen during the first televised
debate in March but shared
the airtime with four other
candidates. Conservative Fran-
MAXPPP/ZUMA PRESS
çois Fillon and socialist Benoît
Hamon have now backed Mr.
Macron in a bid to defeat the
far-right candidate. This, ana-
lysts say, severely dents his
antiestablishment credentials.
In a note to their clients
last week, U.S. bank Citigroup
Inc. warned that the debate
could swing votes toward Ms.
Le Pen, who is “likely to focus
WTI crude 47.66 g 2.42%
and cheap gasoline, will re-
duce GM’s inventory, now ac-
counting for more than one-
fifth of the industry’s total.
Working down alarmingly
high inventories can take a
deep financial toll, however.
Journal found. He has also pro-
vided personal guarantees on
more than $300 million of the
debt, according to the analysis.
Jamie Gorelick, a lawyer
representing Mr. Kushner, said
in a statement that his stake in
Cadre is housed in a company
he owns called BFPS Ventures
LLC. His ownership of BFPS is
reported in his financial-dis-
closure form, although it
doesn’t mention Cadre.
Ms. Gorelick said the Cadre
stake is described in a revised
version of his financial-disclo-
sure form that will be made
public after it has been certified
by ethics officials. She said Mr.
Kushner has previously dis-
cussed his Cadre ownership
with the Office of Government
Emmanuel Macron held his own against Marine Le Pen in a March debate with other candidates.
her attacks on Macron’s in-
vestment-banking past, his
establishment status, relative
lack of experience, acceptance
Wednesday, May 3, 2017 | B1
German Bund yield 0.330% 10-Year Treasury yield 2.296%
United,
Ford, the No.2 seller in the
U.S., faced a glut last spring
Other
and took tough actions to
work it down. The company,
however, has reported four
consecutive quarterly earnings
Airlines
declines dating back to early
in 2016, and its share price
has suffered.
Warned
DANIEL ACKER/BLOOMBERG NEWS
GM already has relatively
low utilization of its North BY DOUG CAMERON
American factories, according AND SUSAN CAREY
to WardsAuto.com. It has laid
off thousands of hourly em- Lawmakers on Tuesday
ployees because of sagging de- warned U.S. airlines they faced
mand for fuel-sipping passen- more regulation if they didn’t
ger cars. Now the auto maker’s follow through with pledges to
core truck business is also improve customer service fol-
showing fatigue. lowing the widespread outcry
Fred Rentschler, a dealer in over the treatment of a United
Slatington, Pa., said his fam- Continental Holdings Inc.
ily’s Chevrolet store has 120 passenger last month.
models on the lot and another Members of the House
50 on the way, nearly 20% Transportation and Infrastruc-
more than the same time last ture Committee took broad
year. “They’re coming through swipes at airlines’ treatment
with inventory,” he said. of passengers and the impact
Please see CARS page B2 of industry consolidation dur-
ing a marathon hearing lasting
more than four hours.
Lawmakers didn’t offer spe-
cific objectives airlines should
reach to avoid Congress step-
ping in, beyond ending any
forced removal of passengers
because of overbooking, but
called on carriers to put their
houses in order.
“I don’t believe in reregula-
tion, but Congress will not
hesitate to act,” committee
chairman Rep. Bill Shuster (R.,
Pa.) told the four airline repre-
sentatives at the hearing. “If
we don’t see meaningful im-
provements, I can assure you
that you won’t like the out-
come,” he said.
The hearing comes several
days after United said it would
change a number of its poli-
cies affecting customers, and
after reaching a settlement for
SAUL LOEB/AGENCE FRANCE-PRESSE/GETTY IMAGES
an undisclosed amount with
passenger Dr. David Dao, who
was injured when he was
dragged off a United Express
flight by Chicago aviation law-
enforcement officers in April.
United Chief Executive Os-
car Munoz, speaking in his
first public appearance since
the incident, told lawmakers
that the event was “a turning
point” for the airline. “Ulti-
mately, our actions will speak
louder than words,” he said.
He added that customers
can expect “a constant
stream” of changes, building
on recently announced efforts
to avoid overbooking and give
Ethics and that Mr. Kushner has staff more freedom to handle
“resigned from Cadre’s board, difficult situations.
assigned his voting rights and Domestic airline industry
reduced his ownership share.” service was largely deregu-
A spokesman for the Office lated in 1978, allowing carriers
of Government Ethics didn’t re- to operate any route and set
spond to a request to comment. their own fares. But industry
Ms. Gorelick said that it is changes such as baggage fees
“very normal” for a financial- and incidents such as lengthy
disclosure form to be revised airport tarmac delays have
and that the form was prepared triggered some small moves to
by Mr. Kushner’s lawyers on his add back rules, as well as calls
behalf. A White House spokes- for more oversight.
woman referred questions to Lawmakers’ questions on
Mr. Kushner’s lawyer. Tuesday ranged from airlines’
Trevor Potter, a Republican overbooking policies and fees
former chairman of the Fed- to change flights to the size of
eral Election Commission, and aircraft seats, with some tak-
other ethics experts said in- ing aim at the perceived lack
vestments such as Mr. Kush- of competition created by in-
ner’s ownership of Cadre typi- dustry consolidation. More
Please see KUSHNER page B6 Please see UNITED page B2
of immigration, globalization
and the diktat of the Euro-
bate in investors’ minds can
be gauged by the implied vola-
pean Union.” tility of options offering insur-
The importance of the de- Please see MARKETS page B2
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
B2 | Wednesday, May 3, 2017
INDEX TO BUSINESSES
These indexes cite notable references to most parent companies and businesspeople
in today’s edition. Articles on regional page inserts aren’t cited in these indexes.
A Fiat Chrysler
Accell Group................B5
Aceco TI......................A1
Acer.............................B4
Advanced Micro Devices
...................................B10
Alaska Air Group........B2
Alitalia.........................B3
Alphabet................A2,B4
American International
Group.........................B5
Angie's List.................B5
Apple ................ A2,B4,B5
B IAC/InterActiveCorp...B5
Barclays.......................A1
Berkshire Hathaway...B7
BP................................B3
C
Caterpillar ................... B5
Chevron ..................... B10
Compensia...................B2
Cummins ................... B10
D Lenovo Group..............B4
Delta Air Lines ........... B2
Diageo ....................... B10
E Mastercard...........B7,B10
Eurobank Ergasias......A4
Exxon Mobil..............B10
F Mylan...........................B2
Facebook ..................... A1
Ferrovial......................A7
A
INDEX TO PEOPLE
Adler, Eric....................B9
B Gilvary, Brian..............B3
Beers, Tom..................B7
Borges, Mark .............. B2
Bourla, Albert.............B3
Bresch, Heather..........B2
Buffett, Warren..........B7
C AND THEO FRANCIS
Cavanaugh, Karyn.....B10
Chou, Tracy.................A2
Clayton, Jay ................ B6
Cordray, Richard..........B6
Coury, Robert J...........B2
Curry, Thomas.............B6
D-F
Durfee, Mary...............B7
Forest, Nicolas............B2
GM to write down
Venezuela business
General Motors Co. said it
is taking a $100 million charge
as it writes off its operations in
Venezuela, where authorities
last month seized its produc-
tion plant on a court order.
Car output, along with most
industrial activity, has plum-
meted in the South American
country amid a punishing eco-
nomic crisis where companies
lack access to hard currency
because of the leftist govern-
ment’s rigid controls.
Unable to pay for imports,
CARS
Continued from the prior page
“We’re just not selling them as
quickly.”
Ford sales chief Mark
Laneve set an upbeat tone,
saying “our big seasonal sell-
ing months are still in front of
us.”
Mark Wakefield, global co-
head of consultancy Alix Part-
ners’s automotive practice,
said he was encouraged that
some auto makers’ have pulled
back on passenger-car produc-
tion, such as Chevrolet Malibu
sedans or Ford’s Focus com-
pacts.
“You may start to see truck
production cut and even more
on the car side,” Mr. Wakefield
UNITED
Continued from the prior page
than 80% of domestic capacity
is now in the hands of just
four airlines, following mega-
mergers since 2008.
Rep. Albio Sires (D., N.J.)
asked Mr. Munoz: “Are you too
big to manage your industry?”
The CEO responded that the
large scale of his carrier’s net-
work “allows freedom of
choice” for consumers. Airline
executives also pointed out
that overbooking helped boost
capacity and lower fares.
Committee members said
they have asked the Govern-
ment Accountability Office to
probe airline customer service,
including disclosures made to
passengers and their contrac-
tual rights.
The U.S. Department of
Transportation launched a re-
view of United’s booking poli-
cies in the wake of the inci-
dent.
In addition to United, other
airlines have moved to make
some changes.
Southwest Airlines Co.
said last week that it would
end overbooking by the end of
June, citing the United inci-
dent for a decision to move
O
Automobiles ............. B1 Och-Ziff Capital
Ford Motor ..... B1,B5,B10 Management Group . B6
Fortress Investment
Group.........................B9
P
G Pacifica Capital...........B9
Pfizer...........................B3
General Motors ... B1,B10
PGIM Real Estate.......B9
Goldman Sachs GroupA1
Pinterest.....................A2
Google.........................A2
Pon Holdings...............B5
H
Prudential Financial....B9
Hyundai Motor............B4 Q
I Qualcomm...................B4
R
Infosys.........................B4
Royal Dutch Shell.......B3
Intel...........................B10
Ryanair Holdings ........ B3
Intel Capital................B4
J S
Jones Lang LaSalle.....B9 Salesforce ................... B4
Samsung Electronics..B4
K
SAP..............................B5
KKR ............................. A1
Southwest Airlines .... B2
L S&P 500.....................B10
T
M Tata Consultancy
Marriott InternationalB9 Services.....................B4
TechFreedom...............B4
Microsoft.....................B4 Tokyo Star Bank.........B9
Mori Building..............B9 Total ............................ B3
U
N United Continental
Nasdaq ...................... B10 Holdings....................B1
G R
Giancarlo, ChristopherB6 Rentschler, Fred..........B1
S about $164 million
K Somorjai, John............B4
Kavanaugh, Brett........B4 Srinivasan, Sri ............ B4
Kirby, Scott.................B2 Sulkin, Seth ................ B9
Kushner, Jared............B1 Suzuki, Hideaki...........B9
L T
Leder, Michelle............B2 Tanaka, Jon.................B9
Tariq, Musa.................B5
M
Tatel, David.................B4
MacDonald, Holly........B1
Munger, Charles..........B7 V chairman received nearly $100
Munoz, Oscar..............B1 Villere, Lamar...........B10
N-O W-Z
Noreika, Keith.............B6
Och, Daniel..................B6
Wakefield, Mark.........B2
Wilson, Mike.............B10
Otting, Joseph............B6 Zuckerberg, Mark.......A1
GM’s Venezuela unit hasn’t as-
sembled a vehicle since Decem-
ber 2015, according to data
from the Venezuelan car mak-
ers’ association.
The U.S. auto maker said
Tuesday that it is open to dis-
cussing with Venezuela’s gov-
ernment the possibility of re-
starting production “with a
new, viable business model.”
The government linked the
plant seizure to a nearly two-
decade-old lawsuit filed against
the auto maker by a local deal-
ership. General Motors has
called the suit “absurd” and
filed an appeal with the coun-
try’s top court.
—Kejal Vyas
said. April’s “inventories were
planned on higher selling—
there is more [inventory] out
there but not grossly more.
It’s climbing and it needs to be
managed.”
The largest Japanese auto
maker, Toyota Motor Corp.,
reported a 4.4% drop in April
sales. Honda Motor Co.’s U.S.
sales decreased 7% for the
month. Nissan Motor Co.—
among the only mass-market
players showing growth for
2017—posted its first sales de-
cline of the year, with April
sales dropping 1.5%.
Among European auto mak-
ers, Volkswagen AG reported
a 1.6% increase in U.S. sales
for April, while Daimler AG’s
Mercedes-Benz USA and BMW
AG’s U.S. arm posted declines
of 7.9% and 12%, respectively.
faster to get rid of the policy.
Alaska Air Group Inc. said
Tuesday it may follow suit.
William McGee, representing
the Consumers Union, said at
the hearing that it shouldn’t
take a social-media event like
the United incident to drive
airlines to improve their cus-
tomer service.
The hearing gave some air-
line executives a chance to de-
fend policies like overbooking.
Scott Kirby, United’s presi-
dent, said it allows the com-
pany “to take care of thou-
sands of passengers we
otherwise couldn’t accommo-
date.”
Joseph Sprague, Alaska’s
CHIP SOMODEVILLA/GETTY IMAGES
United CEO Oscar Munoz, left, and United President Scott Kirby
attended a House committee hearing on Tuesday.
Robert J. Coury, shown in 2015, received one of the largest pay packages disclosed this year for any public company.
Mylan Chairman Lands Huge Pay
Compensation totals
for year marked by
EpiPen controversy
BY MARK MAREMONT
Mylan NV disclosed that its
million last year, among the
largest pay packages dis-
closed this year for any public
company, even as the drug-
maker was buffeted in 2016 by a
public furor over hefty price in-
creases on its lifesaving EpiPen.
The disclosed pay for Rob-
ert J. Coury doesn’t include an
additional $66.3 million in re-
tirement benefits and other
payments that Mr. Coury re-
ceived last year in connection
with what Mylan called his
transition from executive
chairman to a nonemployee
chairman role.
The added sum brings Mr.
Coury’s total 2016 payday
to just shy of $164 million. Al-
though no longer an employee,
Mr. Coury will continue to re-
ceive $1.8 million a year as a
“cash retainer” as part of an
agreement struck last year. He
also received one million re-
HEARD
Continued from the prior page
tensions have resurfaced. In
a submission to a January
report by the Court of Audi-
tors, which supervises
French state activities, Re-
nault said public interven-
tions “weakened the com-
pany more than they
strengthened it.” Mr. Ghosn
told analysts in February
that “as long as the French
state remains a shareholder,”
Renault cannot move closer
toward a formal merger with
Nissan, despite ever-tighter
operational links.
Mr. Macron was acting
under Mr. Hollande’s author-
ity in 2015. He might behave
differently as boss of his
own centrist party, En
senior vice president of exter-
nal relations, agreed, saying
his carrier was able to make
available 675,000 seats last
year that wouldn’t have other-
wise been available by over-
booking. Those seats were
used by last-minute business
travelers and for extra cus-
tomers caught up in weather
or operational problems. He
also said this practice helps
keeps fares low.
Airline shares all rose Tues-
day, lifted by an upbeat April
traffic report from Delta Air
Lines Inc., and analysts have
largely discounted any poten-
tial financial impact from the
United incident.
BUSINESS & FINANCE
stricted stock units, worth
about $37 million at current
share prices, most of which
vest in mid-2019.
“During Mr. Coury’s long
tenure, Mylan has delivered
strong financial performance
and shareholder growth, and
his new compensation struc-
ture continues to be aligned
with the company’s stock per-
formance while providing
The drugmaker says
his pay is ‘aligned
with the company’s
stock performance.’
shareholders with the benefit
of his continued leadership
and guidance in setting My-
lan’s strategic direction,” the
company said in a statement.
A Mylan spokeswoman said
the added $66.3 million in Mr.
Coury’s pay had been included
in some form in prior years’
pay disclosures, but became
payable to him last year. The
bulk of that was a $50.4 mil-
lion pension accumulated by
Mr. Coury, 56 years old, who
joined Mylan in 2002.
Marche, which he set up af-
ter quitting the cabinet last
year. The party’s manifesto
includes a commitment to
sell down minority state
shareholdings to fund a €10
billion ($10.9 billion) invest-
ment fund focused on “the
industry of the future.”
But it seems unlikely Mr.
Macron will undo his Renault
share purchases. He raised
the government’s stake at
what turned out to be a peak.
Reducing it now would expose
him to accusations of mis-
managing public money. A re-
cent Court of Auditors report
noted the woeful investment
performance of the govern-
ment’s €77 billion portfolio of
listed assets: State-backed
stocks fell 29% from 2010
through 2016, compared with
a gain of 28% for the French
stock-market index.
MARKETS
Continued from the prior page
ance against future swings in
the euro versus the U.S. dollar.
Two weeks ago, as one-week
contracts started maturing af-
ter the first round of the elec-
tion, their implied volatility
shot up to 0.17 percentage
point from 0.07.
But yet another rise hap-
pened when the options
started maturing after the de-
bate, going up to 0.2 percent-
age point.
The cost of insurance plum-
meted across the board after
Mr. Macron finished ahead in
the first round on April 23
with 24% of the vote, against
Ms. Le Pen’s 21%.
The CAC-40 stock index is
up 4.8% since, and the extra
compensation investors de-
mand to hold French 10-year
sovereign debt over German
paper has fallen to around 0.5
percentage point, from more
than 0.7.
Yet, the spread remains
double what it was before
French election jitters started
settling in and has slightly
edged up again over the past
week.
“I expect more volatility,”
said Nicolas Forest, global
THE WALL STREET JOURNAL.
Even though Mr. Coury re-
mains chairman, the company
paid him a termination benefit
of $22.3 million, which in-
cluded $4.6 million related to
three years of continued per-
sonal use of company air-
craft. This sum was part of the
nearly $100 million in dis-
closed pay.
It isn’t unheard of for high-
profile chiefs or senior execu-
tives to have separation agree-
ments that guarantee them big
payouts—and then also negoti-
ate agreements that pay hand-
somely for being on hand after
they step down, said Mark
Borges, a compensation con-
sultant at Compensia Inc. and
a former SEC lawyer.
“It takes what I think is a
customary arrangement you
see in a lot of companies, and
it magnifies it when you have
this kind of money at stake,”
Mr. Borges said.
Even before Mr. Coury’s big
2016 payday, Mylan in the five
years ended in 2015 had the
second-highest executive com-
pensation among all U.S. drug
and biotech firms, paying its
top five managers a total of
nearly $300 million, according
to a Wall Street Journal analy-
sis published last September.
Mylan Chief Executive Offi-
Mr. Ghosn has a personal
interest in seeing off the
French state: It keeps voting
against his pay. Last year, it
cobbled together with other
investors a slim majority
against his remuneration
package. Renault ignored the
unbinding vote, prompting
enough outrage for a new law
Balance of Power
Stakes of key Renault
shareholders
30%
25
French State
20
15
Nissan
10
April 2002 2010
Source: FactSet
THE WALL STREET JOURNAL.
head of fixed-income manage-
ment at Candriam Investors
Group, who highlighted the
debate as “the big important
event for markets.”
To be sure, the widespread
belief remains that Mr. Ma-
cron will have an easy win:
The latest polls show he is set
to win around 60% of the
votes, a distance that is seen
by most analysts as insur-
mountable.
Whether televised debates
can deliver election swings has
been thoroughly researched in
the U.S. but remains unclear.
According to University of
Wisconsin-Milwaukee profes-
sor of political science
Thomas Holbrook, even
though there is “pretty thin
evidence” that debates steer
election outcomes, they can
sometimes “change the narra-
tive” of a campaign.
In last year’s U.S. presiden-
tial campaign, Democratic can-
didate Hillary Clinton ap-
peared to get a boost in the
polls after each of the three
debates she had against Don-
ald Trump, but she lost the
election. Research for the 2012
campaign that pitted Barack
Obama against Mitt Romney
found that much of these
moves aren’t due to people
changing their minds on who
JAMIE MCCARTHY/WIREIMAGE/GETTY IMAGES
cer Heather Bresch, who testi-
fied before Congress last year
over the EpiPen pricing con-
troversy, received a 2016 pay
package of $13.8 million, down
from $18.9 million in 2015.
Mylan came under fire last
year over repeated price in-
creases for the EpiPen, its only
big-selling branded product,
which delivers an emergency
shot of epinephrine to counter
severe allergic reactions.
The EpiPen at the time car-
ried a list price of $608 for a
two-pen pack, double its price
in early 2014 and up nearly
550% since 2007, according to
Truven Health Analytics.
Mylan has since launched a
cheaper, generic version of
EpiPen, and Ms. Bresch has
said part of the blame for the
price increases should fall on
middlemen and opaque pricing
in the pharmacy-supply chain.
As for Mr. Coury’s pay
package, “any parent who has
had to shell out money for an
Epipen, this would be shocking
to them, I think," said Michelle
Leder, founder of securities-
filings research firm foot-
noted.com.
She said the company could
have disclosed the different
components of his pay more
clearly.
that makes the vote binding.
Mr. Ghosn’s public com-
plaints about matters of
strategy at Renault are also
probably counterproductive.
If the state sold out, a more
fundamental integration of
Renault and Nissan
“wouldn’t take too much
time,” he said in February. It
is precisely the prospect of a
French industrial champion
being subsumed into a larger
Asian entity that worries
French politicians.
The long shadow of popu-
list Marine Le Pen will en-
sure Mr. Macron can’t wave
aside such concerns, even if
he wins Sunday’s election.
Renault seems likely to re-
main a “strategic” French as-
set—with a state sharehold-
ing and stock-exchange
discount to match—for the
foreseeable future.
to vote for, but rather because
the winner’s supporters be-
come more eager to answer
pollsters.
“When you have three or
four debates, typically the net
effect tends to wash out,” said
Robert S. Erikson, professor of
political science at Columbia
University, but short-term ef-
fects can be more powerful,
which in this case might work
in Ms. Le Pen’s favor.
“What could be interesting
is how many people will watch
the debate,” said Didier Saint-
Georges, managing director
and member of the investment
committee at Carmignac, a
French asset manager with
€56 billion ($61 billion) under
its wing. “If viewing is very
low, it could be perceived as a
preview of a low turnout on
election day,” which could
conceivably give Ms. Le Pen a
fighting chance.
Even if he wins Sunday, Mr.
Macron could struggle to se-
cure enough support for his up-
start platform En Marche (“On
the Move”), which is barely a
year old, if he can’t field strong
enough candidates in the legis-
lative elections in June. This
could hamper his pro-market
agenda, investors say.
—Riva Gold
contributed to this article.
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
THE WALL STREET JOURNAL. Wednesday, May 3, 2017 | B3

BUSINESS NEWS

Alitalia Approaches Bankruptcy BP Swings to Profit

Breakup also possible;
investors plan to ask As Oil Sector Fuels
Italy to put airline in
special administration Investor Optimism
BY MANUELA MESCO BY SARAH KENT and spilled millions of barrels
of oil into the sea has reached
MILAN—Alitalia SpA edged LONDON—BP PLC was the nearly $63 billion, BP said.
DANIEL DAL ZENNARO/EUROPEAN PRESSPHOTO AGENCY

closer to bankruptcy or latest big oil company to re- The payments relating to
breakup after its shareholders port a sharp increase in profit the spill are expected to total
agreed Tuesday to ask the Ital- Tuesday, adding to optimism between $4.5 billion and $5.5
ian government to step in to that the sector may have billion in 2017, before falling
help the carrier. moved past its worst period to around $2 billion in 2018.
Alitalia’s owners said it following the dramatic slump The company reported ro-
would ask the government to in energy prices. bust operating cash flow in
put the airline in special ad- The British oil giant said it the first quarter, which is ex-
ministration as the owners, swung to profit in the first pected to continue to improve.
creditors and the government quarter, benefiting from a Excluding payments related to
decide whether to try to re- roughly 60% increase in prices the oil spill, the company’s
launch the flag carrier, sell it since the first quarter of 2016 cash flow from operations im-
to a larger rival or start bank- and higher production vol- proved to $4.4 billion in the
ruptcy proceedings. umes. first quarter, helping it main-
Alitalia has been hemorrhag- Alitalia has been hemorrhaging money, hurt by labor costs and competition from budget carriers. The results were the latest tain a dividend of 10 cents a
ing money, dragged down by in a flurry of upbeat earn- share.
high labor costs and competi- past two decades, announced a It could sell out to a larger ri- in recent days rejected the idea ings from the world’s biggest
tion from budget airlines such new strategic plan in March that val, either as a whole or split of a public rescue. oil companies, several of
Ryanair Holdings PLC, Europe’s included cuts of €1 billion ($1.09 into parts. But there appears to If the government-ap- which have enjoyed their
largest airline by passenger billion). However, the airline’s be little interest among compet- pointed administrator finds no most successful quarter in
numbers. Management efforts employees rejected the plan, itors. Last week, German carrier other solution in six months, more than a year. The im-
to make Alitalia more competi- which would have cut flight Lufthansa denied any interest in the company will go into liqui- provement has left investors

RONALDO SCHEMIDT/AFP/GETTY IMAGES

tive by slashing jobs and perks crews’ wages by 8% and elimi- buying Alitalia after rumors dation. Such a possibility hopeful that the sector may
have been rejected by unions. nated some 980 jobs. spread of talks between the two. could reignite support from be recovering following the
Under special administra- As a result, the company’s The Italian government could politicians for public assis- tumble in oil prices after the
tion, the current board of the board had to scotch a €2 billion also take over Alitalia. However, tance to help the 12,500 em- summer of 2014.
company will be erased and capital increase needed to buy analysts estimate that Italian ployees whose jobs are at risk. Last week, Exxon Mobil
shareholders will become planes, launch new long-haul taxpayers have already spent Meanwhile, the government Corp. reported its best quarter
creditors of the group. routes and improve service. €10 billion over the years to will lend Alitalia €600 million since 2015. Chevron Corp.
Alitalia, which is 49%-owned Now, with little cash left, help Alitalia and there is little to continue flying. posted a profit of $2.7 billion,
by Etihad Airways and has the Italian carrier faces a se- enthusiasm for a new state bail- —Robert Wall after reporting a loss for 2016
turned a profit only once in the ries of unpalatable choices. out. The Italian government has contributed to this article. and France’s Total SA said its
profit surged 77% in the first BP reported robust cash flow.
three months of 2017. Royal

Pfizer Revenue Slips as Patents End

BY JONATHAN D. ROCKOFF such gains weren’t enough to
AND AUSTEN HUFFORD make up for declining revenue
from old workhorses such as
Pfizer Inc. said Tuesday the antidepressant Pristiq,
that revenue fell 2% in its lat- which lost marketing exclusiv-
est quarter to $12.78 billion as ity and started to face generic
some of the company’s legacy competition in the U.S. during
drugs lost patent protection in the quarter.
key markets, though execu- Also hurting Pfizer’s perfor-
tives also blamed one-time mance was an 8% drop in
factors and voiced optimism world-wide sales of the com-
about prospects for the year. pany’s top-selling product, the
Pfizer’s revenue got a bump Prevnar pneumonia vaccine, to
from newer products such as $1.4 billion because many el-
lung-cancer drug Ibrance and derly patients have already
blood thinner Eliquis, whose been vaccinated.
sales rose over 50% each. But Executives said Pfizer reve-
nue came up $300 million
short because of fewer selling
days in the quarter. The year-
over-year comparison was also
hurt, executives said, by the
sale of one of the businesses
acquired when Pfizer bought
Hospira in 2015.
“We are really looking for-
ward to the rest of the year.
Our business is strong,” Pfizer
Chief Executive Ian Read said
during a conference call with
analysts and investors.
Mr. Read pointed to a num-
ber of promising drugs in de-
velopment that could eventu-
ally boost sales. Pfizer, based
in New York, is making a pri-
ority of boosting sales of its
existing products, he said.
Pfizer executive Albert
Bourla, who runs the unit that
sells Pfizer’s patent-protected
drugs, said the company is
trying to enlarge the number
of doctors prescribing pros-
tate-cancer drug Xtandi.
In all for its first quarter,
Pfizer reported a profit of
$3.12 billion, or 51 cents a
share, up 2.6% from $3.04 bil-
lion, or 49 cents a share, a
year earlier.
Dutch Shell PLC is due to re-
port later this week.
BP said Tuesday its replace-
ment cost profit—a number
analogous to the net income
that U.S. oil companies re-
port—was $1.4 billion in the
first quarter, compared with a
loss of $485 million in the
comparable period a year ear-
lier.
The results were some of
the company’s strongest since
it announced a massive $20
billion deal to settle outstand-
ing claims relating to its Gulf
of Mexico blowout.
The company’s shares rose
1.6% in London trading.
The pretax bill for the 2010
disaster that killed 11 workers
This will reassure investors,
who received a jolt in Febru-
ary when the company said it
needed oil prices to rise to
$60 a barrel to break even.
That number is expected to
drift closer to $55 a barrel in
2017.
Cash flow is also seen
strengthening as part of BP’s
plan to bring on seven new
projects this year.
The company sees oil trad-
ing at $50 to $55 a barrel in
2017, likely capped by stronger
shale production in the U.S.,
Chief Financial Officer Brian
Gilvary said, despite efforts by
the Organization of the Petro-
leum Exporting Countries to
curb output and boost prices.

Aetna Retreats Further

From Individual Plans
BY ANNA WILDE MATHEWS tions surrounding the future of
AND IMANI MOISE the ACA itself, which House

The Journal.
Republicans are trying to over-
Aetna Inc. will scale back haul with a bill that hasn’t won
its presence again in the Af- enough votes to move forward.
fordable Care Act exchanges in Industry officials have also

Anytime, Anywhere.
2018, saying it expects losses said they need certainty
on the business this year de- around federal payments that
spite sharply reduced enroll- currently help reduce health
ment in its individual plans. costs for low-income ACA en-
The health insurer’s disclo- rollees. Anthem Inc. has said
sure came as it swung to a loss that without these cost-shar-
in the most recent quarter in ing payments, premiums could
the aftermath of its failed rise 20% or more and it will
merger with Humana Inc. Ex- consider cutting back in, or
cluding the impact of merger-
termination costs and other
completely exiting, certain
ACA markets.
Quickly access all of the Journal’s
items, Aetna beat analysts’ ex-
pectations for the first quarter
In all for the first quarter,
Aetna reported a loss of $381
need-to-know news, markets data,
and lifted the bottom end of
the range of earnings it has
million, or $1.11 a share, com-
pared with a profit of $737
commentary and analysis when
projected for the full year. million, or $2.08 a share, a you’re on the go with WSJ Apps.
Individual plans are a small year earlier. Revenue fell 3.4%
share of Aetna’s overall busi- to $15.17 billion.
ness, and the insurer has al- Under the terms of the
ready reduced its exchange merger deal with Aetna, Hu-
presence to four ACA market- mana was due to receive a $1
places from 15 last year. billion breakup fee.
On an adjusted basis, the
Hartford, Conn.-based com-
pany earned $2.71 a share,
The health insurer compared with a year-earlier
has been stepping $2.32 a share and a forecast of
$2.37 from analysts polled by
back from Affordable Thomson Reuters. Analysts
Care Act exchanges. noted a strong performance in
Aetna’s core employer busi-
ness in the latest quarter.
Aetna is also seeing expan-
Aetna said it expects 2017 sion in its Medicaid and Medi-
losses on its individual business care lines, where it has said it
will amount to roughly half its would seek growth in the wake
loss last year, which was $450 of its failed attempt to acquire
million. Its individual enroll- Humana, a strong Medicare
ment stands at 255,000, down player. Mr. Guertin said that
from about 964,000 at the end the recent quarter marked the
of 2016. But the first-quarter first time when Aetna had
total was larger than it had ex- more premiums from its gov-
pected, and Aetna’s chief finan- ernment business than its tra-
cial officer, Shawn Guertin, said ditional commercial plans.
the company was seeing Aetna said it now expects
“higher cost levels than we had earnings of $8.80 to $9 a share
previously projected” among for 2017, bracketing analysts’
enrollees. projections of $8.88 a share. In
Aetna’s comments represent January, Aetna projected earn-
the latest alarm coming from ings of at least $8.55 a share.
an insurer about continued On a net basis, the company
struggles with the exchanges expects the fallout from the
as the industry is in the pro- Humana merger to dent its
cess of filing 2018 plans with full-year earnings by $3.69 a
state regulators. Like Humana, share. A federal judge blocked
which said in February that it the proposed $34 billion deal
would withdraw completely between the two health insur-
from the ACA marketplaces, ers on antitrust grounds, and
Aetna pointed to the underly- Aetna and Humana said in
ing economics of the business. February that they wouldn’t © 2017 Dow Jones & Co. Inc. All rights reserved. 4DJ5435
Insurers are facing ques- appeal the decision.
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
B4 | Wednesday, May 3, 2017
Salesforce
Launches
Fund for
Startups
BY JAY GREENE
Salesforce.com Inc. is
pumping $100 million into its
fourth investment fund, aimed
at helping startups develop
apps that work with its busi-
ness software services.
Salesforce Ventures, the
company’s corporate invest-
ment arm, launched the
new Salesforce Platform Fund
on Tuesday to support early-
stage companies, with the goal
of “building an ecosystem of
partners around us,” said John
Somorjai, executive vice presi-
dent of corporate development
and Salesforce Ventures.
Salesforce is among several
tech companies with venture
funds that invest in startups
for varying reasons. The ven-
ture arms of Salesforce, Qual-
comm Inc. and Microsoft
Corp. tend to focus more on
the strategic return to their
respective companies. Others,
such as Intel Capital and Al-
phabet Inc.’s GV, are set up
like traditional venture-capital
funds with the chief goal of
delivering financial returns.
A $100 million effort
would help develop
apps for business
software services.
More generally, corporate
venture capital has gained
popularity in recent years as
old-line companies have
sought to keep up with shifts
in technology. Boeing Co., Kel-
logg Co. and Campbell Soup
Co. have all set up venture
funds in the past year.
Past Salesforce invest-
ments include web-storage
company Box Inc., document-
sharing startup DocuSign Inc.,
and communications software
maker Twilio Inc., all of which
have services that run
on Salesforce’s cloud-comput-
ing platform. The company
has invested in more than 200
startups since 2009, with
nearly 50 of those being ac-
quired and eight holding ini-
tial public offerings of stock.
Salesforce focuses on start-
ups that already have custom-
ers, Mr. Somorjai said.
The company’s investments,
made alongside venture-capi-
tal firms, have ranged between
$250,000 and $10 mil-
lion. Salesforce takes owner-
ship stakes under 10% and
doesn’t seek board seats.
The new fund aims to pro-
vide a boost to companies fu-
eling Salesforce’s growth.
The company recently
stepped up efforts to weave
artificial intelligence into its
services, and that interest will
carry over to its investments.
Salesforce Ventures doesn’t
disclose its financial returns,
but a company regulatory fil-
ing noted that the fair-market
value of its privately held in-
vestments as of Jan. 31 was
$758.3 million, and that in-
cluded $232.3 million in unre-
alized gains.
Salesforce’s previous three
funds have invested in mobile
technology, European startups
and businesses focused on the
company’s software-develop-
ment platform. Mr. Somorjai
expects to spend the $100 mil-
lion earmarked for the new
fund within two years.
Critics of Net Neutrality Are Dealt a Legal Setback
BY JOHN D. MCKINNON
WASHINGTON—A federal
court declined to reconsider
telecommunications companies’
challenge to Obama-era net-
neutrality rules on Monday,
setting the stage for a likely ap-
peal to the Supreme Court.
The widely anticipated re-
jection came just days after Fed-
eral Communications Commis-
sion Chairman Ajit Pai laid out
his proposal for rolling back the
net-neutrality rules, giving the
industry a big win. But the tele-
com companies and their allies
are still looking to the courts for
backing in their opposition to
the net-neutrality regulations.
That could give them more le-
gal protection whenever Demo-
Microsoft Bolsters Laptop Lineup
New low-end device
targets school market;
higher-price model
takes on MacBook Air
BY JAY GREENE
Microsoft Corp. and its
partners unveiled new laptops
aimed at challenging Alphabet
Inc.’s Google at the low-end of
the education market and Ap-
ple Inc. at higher prices.
The marquee device, intro-
duced in New York on Tuesday,
was Microsoft’s new Surface
Laptop, a sleek $999 device
that comes in four colors and
is meant to compete with Ap-
ple’s MacBook Air.
Microsoft’s partners, includ-
ing Acer Inc., Lenovo Group
Ltd. and HP Inc., also rolled
out new low-cost laptops for
students and teachers starting
at $189. Those devices are
aimed helping Microsoft catch
up in the education market,
which Google has seized with
its Chrome operating system
designed for low-cost laptops.
Devices running Chrome OS
accounted for 58% of operat-
ing-system shipments to the
kindergarten-through-12th-
grade market in the U.S. last
year, according to Future-
source Consulting Ltd. Win-
dows registered a 22% share.
All of the new devices run
Windows 10 S, a new variant
of Microsoft’s flagship operat-
ing system. The new OS only
permits users to run apps ob-
tained through Microsoft’s on-
line Windows Store, which the
company says makes the de-
vices more secure and easier
to manage.
The new devices come after
Microsoft revealed its strug-
gles with Surface computers in
the quarter ended March
31. Revenue for the hardware
line plummeted 26% for the
quarter as Microsoft relied on
older models in the market,
while also contending with in-
creased price competition.
Chromebooks have been
particularly popular with stu-
Samsung to Test Self-Drive Cars
BY TIMOTHY W. MARTIN
SEOUL—Samsung
tronics Co. received regula-
Elec-
tory approval to test a self-
driving car in its home
market, a reflection of the
South Korean technology com-
pany’s ambitions in the auto
industry.
South Korea’s Ministry of
Land, Infrastructure and
Transport gave Samsung ap-
proval to test its self-driving
technology on roads in a state-
ment dated Monday, noting
the world’s largest smart-
phone maker’s advancements
in artificial intelligence.
Samsung’s technology will
be used on a Hyundai Motor
Co.-made vehicle, the ministry
said.
It is unclear where the self-
driving car will be tested, but
the South Korean government
has allowed autonomous vehi-
cles access to most public roads
since November, in addition to
a government-run facility.
Samsung confirmed it re-
ceived approval to test drive
an autonomous vehicle using
software made by Samsung
Advanced Institute of Technol-
ogy, the conglomerate’s re-
search-and-development arm.
Tech companies are circling
the auto industry, hoping to
provide the software or algo-
rithms needed to propel driv-
erless cars.
crats retake power.
TechFreedom, a conserva-
tive advocacy group that had
joined in the appeal, said the
decision “clears the way for
TechFreedom and other par-
ties challenging the order to
take their case to the Su-
preme Court.”
It said the case could be-
come a vehicle for rolling back
agencies’ powers. But some le-
gal experts question whether
the high court will accept an
appeal, given that the FCC is
beginning its own rollback.
The FCC’s 2015 net-neutral-
ity rules were aimed at requir-
ing internet-service providers
such as cable and wireless
firms to treat all traffic
equally. The carriers say they
TECHNOLOGY
Microsoft CEO Satya Nadella at Tuesday’s launch event in New York for new high- and low-end laptops from the company.
dents and teachers because
they are easy to manage. Cus-
tomers who use the devices,
which can cost as little as
$150, spend much of their time
in browser-based apps such as
Gmail and Google Docs. The
devices and apps are updated
automatically, making them
particularly appealing to
schools, which often don’t
have technical staff to manage
devices.
While the $189 starting
price for Windows 10 S devices
is higher than the entry-level
prices for Chromebooks, Mi-
crosoft said the laptops will
support pen-based computing
and apps that make use of
augmented reality.
The company is also intro-
ducing updates to the educa-
tion version of its Office 365
productivity application that
will run in Windows 10 S and
will be available free to stu-
dents, faculty and school staff.
They will also get a free one-
year subscription to an educa-
Samsung Electronics headquarters in Seoul. Road tests in Korea
will help the company develop algorithms for autonomous vehicles.
Their interest hasn’t gen-
erally extended to making the
vehicles, but rather supplying
the technology or compo-
nents.
The road tests will help
Samsung develop its deep-
learning algorithms for self-
driving operations, but the
company has no plans to enter
the car-manufacturing busi-
ness, a spokesman said.
Samsung has identified the
automotive sector as a critical
area for growth, as cars are in-
creasingly outfitted with multi-
media platforms and high-tech
software, a potential windfall
for Samsung’s displays and
semiconductor businesses. The
support basic net-neutrality
principles, but opposed the
FCC’s action as regulatory
overreach. Many internet
firms and consumer groups
view the rules as vital for
competition on the internet.
A potential issue is how far U.S. regulatory
agencies can go in implementing policy.
On Monday, the U.S. Circuit
Court of Appeals for the D.C.
Circuit turned down a petition
for rehearing of the telecom-
munications companies’ ap-
peal by all the judges.
The rehearing petition fol-
THE WALL STREET JOURNAL.
tion version of Microsoft’s sumers will be able to pick
popular Minecraft game that them up at retail.
schools can use to teach cod- The new Surface Laptop
ing. weighs 2.76 pounds and mea-
“We think we’re entirely sures 14.47 millimeters at its
competitive in terms of price,” thickest point. It has a 13.5-
Microsoft corporate vice presi- inch screen, and a fabric-cov-
dent Joe Belfiore said in an in- ered keyboard. According to
terview. Microsoft, the battery will last
Other than limiting apps to for 14.5 hours.
those from the Windows Store, Microsoft also updated the
there is little difference be- version of Office 365 offered to
tween Windows 10 S and the students and teachers. The
widely used Windows 10 Pro, company added Teams, a
the version sold to businesses. workplace-collaboration ser-
If customers want to use apps vice introduced in November
not available in the Windows that competes with Slack
Store, such as Apple’s iTunes Technologies Inc. The service
or Google’s Chrome browser, includes features to let teach-
they can pay $49 to upgrade. ers run quizzes and help stu-
Microsoft said its Surface dents join forces on school
Laptop can be preordered and projects.
will be available June 15. Acer The new products should
said its $299 TravelMate Spin “stem the bleeding” for Micro-
B1 device is available now. Mi- soft in the education market,
crosoft said other devices will Forrester Research Inc. analyst
be available this summer, in J.P. Gownder said.
time for the back-to-school “The cost of Windows was
shopping. Schools will be able way too high for schools,” he
to buy them in bulk, and con- said.
makers and newer entrants,
such as Alphabet Inc.’s Waymo
and Tesla Inc., are heavily in-
vesting in similar technology.
Global sales growth has
slowed for smartphones in re-
JEON HEON-KYUN/EUROPEAN PRESSPHOTO AGENCY
cent years, pushing technology
companies such as Samsung
into new fields. This has
sparked a race to create digital
ecosystems linking people’s
cars, kitchens and living
rooms, with much of it con-
trolled using a smartphone.
The Hyundai car using Sam-
sung’s algorithms is equipped
with sensors that recognize
road conditions and obstacles,
according to the ministry.
Samsung plans to develop a
self-driving algorithm that can
be trusted in bad weather, ac-
Suwon, South Korea-based firm cording to the release.
made a splashy entry into the Samsung was the 19th com-
field when it struck an $8 billion pany to receive a permit test-
deal to buy automotive supplier ing autonomous vehicles since
Harman International Industries February 2016, the govern-
Inc. Harman became a subsid- ment agency said, and the
iary of Samsung in March. eighth this year. Several of
Samsung and Harman ex- South Korea’s top engineering
ecutives had said in January universities, auto-supplier
that the two companies Hyundai Mobis Co. and inter-
would use each other’s net giant Naver Corp. have
strengths to try to build an also received permits.
autonomous-car platform The ministry also said it is
that could be sold to auto building a testing area for self-
makers, either as a total sys- driving cars called “K-City.” A
tem or in smaller parts. high-speed driving route will
Samsung rival Apple Inc. is be opened before the end of
in the early phase of testing 2017, the ministry said.
autonomous-vehicle technol- —Min Sun Lee
ogy on roads. Both legacy auto contributed to this article.
lowed a decision upholding high court to take the case and
the rules last year by a three- side with telecom companies.
judge appeals panel. Judge Brett Kavanaugh, who
In a concurring state- dissented, said the FCC’s 2015
ment on Monday, two judges rule lacked any basis in federal
who sat on the panel, Judges law, raising an issue that might
Sri Srinivasan and David Tatel, hold interest for the high
court—the question of how far
regulatory agencies can go in
implementing policy where
Congress hasn’t carved out
clear authority.
Trade group USTelecom,
which represents telecom
companies, said in a written t
said Mr. Pai’s pending pro- statement that it will “con-
posed rollback of the rules tinue to review our legal op-
makes further consideration of tions going forward to fully
the appeal “unwarranted.” protect our open internet, and
But conservatives on the ap- to connect all Americans to
peals court used Monday’s an- the promise and potential of
nouncement to plead for the broadband.”
WSJ.com/Tech
DREW ANGERER/GETTY IMAGES
Microsoft’s focus on reduc-
ing device-management costs
and headaches will likely lure
some schools to the devices,
Mr. Gownder said. He said he
believes schools will be willing
to pay a bit more for the Win-
dows 10 S devices because of
the Office 365 and Minecraft
tie-ins.
“You can’t do that with
Chromebooks,” he said.
Customers who buy Win-
dows 10 S devices could be
similarly frustrated by the in-
ability to sync their iPhones,
since iTunes isn’t available in
the Windows Store. Microsoft
will need to be clear in its
marketing around the operat-
ing system, Mr. Gownder said.
Microsoft’s Mr. Belfiore be-
lieves customers will under-
stand the difference, and said
those who buy Windows 10 S
devices can easily upgrade.
“If you need to switch out
to Pro, that is OK,” Mr. Belfiore
said. “That’s how we designed
the system.”
Infosys
To Tap U.S.
Workers
BY NEWLEY PURNELL
An Indian outsourcer said it
plans to hire some 10,000
American workers in the U.S.
over the next two years, a
move that comes amid scru-
tiny of Indian tech firms for
their heavy use of the H-1B
visa program for highly skilled
foreign workers.
Bangalore-based Infosys
Ltd., India’s second-largest
outsourcer by sales, said it
would open four work centers
in the U.S., the first of which
will open in August in Indiana,
where Vice President Mike
Pence was formerly governor.
The company said it wants
to hire 2,000 workers there by
2021.
Infosys said it wants to help
serve clients in the financial
services, manufacturing, retail
and other sectors, and that it
would hire both seasoned in-
formation-technology profes-
sionals and recent graduates,
providing training in new
technologies such as cloud
computing and artificial intel-
ligence.
“It’s so good to welcome In-
fosys to Indiana,” Gov. Eric J.
Holcomb said.
Indian firms like Infosys
and Tata Consultancy Ser-
vices Ltd., the country’s larg-
est IT services firm by reve-
nue, depend on the H-1B
program to send tens of
thousands of workers every
year to the U.S., their biggest
market. Eighty-five thousand
of the visas are awarded ev-
ery year, many to Indians,
and an estimated 500,000
such visa holders are now in
the U.S.
Critics, like President Don-
ald Trump, say the practice
takes jobs away from Ameri-
cans. Outsourcing firms say
they can’t find enough work-
ers with the right technical
skills in the U.S.
Large U.S. tech firms also
make use of the visas, though
they typically pay higher
wages than those offered by
Indian outsourcers.
Infosys didn’t disclose
where the three additional
centers would be located.
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
THE WALL STREET JOURNAL. Wednesday, May 3, 2017 | B5

MANAGEMENT
IRAs Are HowMillennialBossesCanGainTrust
Found For young executives, the challenge is admitting what they don’t know and seeking advice from elders
To Fail at BY JOANN S. LUBLIN

Sometimes, youth is
worked hard to forge a
strong bond with Andy King,
a then 51-year-old Arrow ex-

Their Goal wasted on young executives.

Companies such as Ford Mo-
tor Co. are recruiting young
ecutive whom the company’s
CEO respected for his suc-
cessful command of its big-
BY LAUREN WEBER bosses to jump-start or rein- gest unit’s operations in Eu-
vent businesses. But those rope, the Middle East and
More than 40 years after leaders often struggle to gain Africa. Mr. Anderson pro-
Congress created individual acceptance and trust from posed that he and Mr. King
retirement accounts, a new skeptical older colleagues. “work together and help
analysis finds the savings Caterpillar Inc., American each other succeed.”
plans aren’t fulfilling their International Group Inc. and When Mr. Anderson be-
mission. SAP SE have came the youngest-ever
IRAs were intended to give YOUR tapped execu- partner of management con-
workers without employer- EXECUTIVE tives in their sultancy Booz & Co. at age
sponsored programs, typically CAREER 30s for senior 30, older colleagues were
those who work in small busi- spots since resentful, he says. One co-
nesses or are self-employed, 2016. And in worker privately griped that
access to tax-advantaged re- late January, Ford hired 34- the new partner “impressed
tirement savings plans. But year-old Musa Tariq as its one or two people, but he
most of the $7.8 trillion first chief brand officer. won’t be able to achieve the
parked in IRAs as of 2016’s Mr. Tariq, who was most revenue needed,” Mr. An-
third quarter came from roll- recently global marketing derson says.
overs of employer-sponsored and communications director Mr. King, now president of
401(k) accounts, according to for Apple Inc.’s retail divi- Arrow’s global components
an analysis of Internal Reve- sion, is helping the No. 2 business, says he has advo-
nue Service data by the Center U.S. auto maker shake up its cated on behalf of Mr. An-
for Retirement Research at 113-year-old business model derson and his team because
Boston College. and shift into new transpor- the younger man offered a
Moreover, most IRA con- tation services. Ford chose fresh perspective and went
tributors also participate in a Mr. Tariq based on his repu- out of his way to collaborate.
401(k) plan at the same time, tation “for challenging con- “Working together, we’ve
the center says. vention,” says Chief Execu- found new ways to invest in
IRAs do little to encourage tive Mark Fields. Being and grow Arrow’s online de-
active saving by the workers young “was OK, too.” sign and sales capabilities,”
for which they were designed, Mr. Tariq is the youngest Mr. King says. At Arrow, he

ROBERT NEUBECKER
said Anqi Chen, a research as- of his 44 fellow corporate of- adds, results count more
sociate at the center and co- ficers. Ford’s top ranks pre- than age.
author, with Alicia Munnell, of viously had been largely Briana J. Mullenax was 35
the paper analyzing IRAs. populated with lifers who when she advanced to part-
“People are using IRAs worked their way up, Mr. ner from senior manager last
mainly as a receptacle for Fields says. The CEO adds May at LBMC PC, an ac-
transfers from employer plans that he has tried to stem managers whose career tra- your partner in execution,” couraged senior executives counting firm in Nashville,
or to supplement employer possible resentment of the jectories have been less me- Mr. Cappelli recommends. to teach Mr. Tariq how to Tenn. A senior manager in
plans,” Ms. Chen said. young newcomer by ensuring teoric. Individuals with Jessica Bigazzi Foster, navigate the bureaucracy. her 50s subsequently turned
Because many workers members of top management younger supervisors must head of the executive de- Mr. Fields says he meets chilly, refusing to offer ideas
don’t want to leave money in interviewed and helped inte- demonstrate their relevance velopment global practice with Mr. Tariq regularly for during several meetings led
an account administered by a grate Mr. Tariq. in the workplace. for RHR International LLP, informal coaching about is- by Ms. Mullenax.
former employer, and it is Demand for young execu- For youthful bosses, leader- a leadership advisory firm, sues such as finding key in- She says her former peer,
time-consuming to move the tives is growing, especially ship specialists say the chal- ternal allies. whom she doesn’t supervise,
savings into a new employer’s in areas like digital com- lenge is admitting what they Among his early tips for had viewed herself as supe-
401(k) program, workers often merce and artificial intelli- don’t know and humbly seek- Ford Motor Co. the new branding chief: rior to Ms. Mullenax because
roll those funds into an IRA. gence, executive coaches and ing advice from their elders. hired 34-year- Travel the world and “get to of her age and experience.
Of the 14% of Americans recruiters say. As a result, Young executives struggle old Musa Tariq know [Ford] people on a Amy Lynch, a genera-
who put money into IRAs in more workers find them- to win acceptance from older as its first personal level.” Ford said tional researcher who
2011, the most recent year selves reporting to younger associates, who expect them chief brand Mr. Tariq was unavailable knows Ms. Mullenax, blames
with data available, 53% had bosses. to be arrogant and make mis- officer in late for interviews. her relative youth for ignor-
a 401(k) plan at the same Nearly four in 10 U.S. em- takes, says Peter Cappelli, a January. Matt Anderson was 35 ing a baby boomer’s con-
time, the researchers found. ployees worked for someone management professor at the when he joined Arrow Elec- cerns “about formality, dig-
The IRA contributors had av- younger in 2014, up from University of Pennsylvania’s tronics Inc. as its first chief nity and privacy.”
erage household earnings of 31% in 2010, concluded sur- Wharton School. He co-wrote says her employer is get- digital officer in 2014, Ms. Mullenax reluctantly
$110,000 and were likely to veys conducted for Career- the book, “Managing the ting more assignments to charged with accelerating agrees. “My generation tends
be white, married and col- Builder, a job site. Older Worker.” coach young executives, es- the electronics distributor’s to be more informal overall
lege-educated. A young star’s appoint- Anyone with a younger pecially those hired from transformation into digital in work,” she says. That’s
IRAs are barely serving ment to upper management boss should say, “I know a outside a firm. products and services. “sometimes harder for older
lower-income families who can be unsettling for older lot of stuff and I’d like to be At Ford, Mr. Fields en- Mr. Anderson says he generations to understand.”
may have some money to

save and could benefit from
the tax advantages of the ac-
counts, the authors found,
based on their analysis of
census data.
There are two types of
IRAs, traditional and Roth,
which, respectively, allow
Americans to make tax-de-
ductible contributions to an
investment account or allow
after-tax savings to increase
tax-free. The tax advantages of
IRAs phase out for high-earn-
ing people.
The authors recommend
that federal or state govern-
ments return IRAs to their
original mission by automati-
cally enrolling workers in the
accounts if they don’t have ac-
cess to employer savings pro-
grams. Workers currently
must select a broker, such as
Vanguard Group or Fidelity
Investments, and open an ac-
count on their own if they
want an IRA.
LABOR
Writers Strike
Averted With Deal
Labor negotiations between
screenwriters and entertainment
producers resulted in an unex-
pected Hollywood ending.
After weeks of acrimonious
talks between the Writers Guild
of America and the Alliance of
Motion Picture and Television
Producers, a tentative new deal
was reached Tuesday morning
shortly after the clock ran out
on the old pact.
Hollywood has been on edge
fearing a work stoppage that
would have put nearly 12,000
writers on strike and paralyze
the entertainment industry and
a significant section of the
Southern California economy.
The last writers strike, a 100-
day stoppage nearly 10 years
ago, cost the entertainment in-
dustry and California economy
$2 billion, according to the
Milken Institute.
Instead, a new three-year
agreement could keep TV shows
and movies in production. The
issues that had divided the two
sides included a basic wage in-
crease for all writers and the
length of exclusive contracts be-
tween writers and shows. Writ-
ers also wanted the minimum
writing fees for streaming and
cable services to be on a par
with the minimum fees for a
broadcast network.
The Writers Guild is expected
to brief its members on the new
accord Thursday.
—Joe Flint
and Erich Schwartzel
BUSINESS WATCH
ACCELL GROUP
Deal With Rival
Pon Falls Through
Dutch bicycle maker Accell
Group NV said it had ended
takeover talks for a proposed a
€872 million ($950.5 million) bid
from closely held rival Pon Hold-
ings, arguing Tuesday that it
was too low and wouldn’t win
enough shareholder support
even after the original offer was
raised.
Pon, one of the Netherlands’
biggest family businesses, first
disclosed its takeover proposal
last month, initially offering
€847.4 million, or €32.72 in cash,
which included a €0.72 dividend,
for each Accell share.
Pon said its latest offer rep-
resented a 55% premium to the
three-month average of Accell’s
closing share price on March 16.
But Accell, based in Heeren-
veen, the Netherlands, said
Tuesday that its stand-alone
strategy of focusing on offering
multiple brands, and taking ad-
vantage of partnerships and dig-
ital platforms to reach a broader
customer base, will generate
more shareholder value.
—Ben Dummett
ANGIE’S LIST
IAC Plans to Buy
Review Website
Barry Diller’s IAC/InterActive-
Corp plans to buy Angie’s List
Inc., combining the consumer-re-
view site with IAC’s HomeAdvi-
sor and forming a new, publicly
traded company.
Under terms of an agree-
ment, Angie’s List investors are
to get either one Class A com-
mon share of the new company,
to be called ANGI Homeservices
Inc., or $8.50 in cash for each
share they own. The most IAC
would pay out in cash would be
$130 million.
At $8.50 a share, the deal
would value Angie’s List at more
than $500 million and represent
a premium of 44% over its clos-
ing price Monday of $5.89.
Shares of Angie’s List were up
63% at $9.60 in midafternoon
trading Tuesday.
Angie’s List is a well-known
service that provides a directory
and recommendations of plumb-
ers and the like, with more than
five million members and 55,000
service professionals.
—Joshua Jamerson

Micro Trends,
Macro Context.
In Minutes.

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For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
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B6 | Wednesday, May 3, 2017 THE WALL STREET JOURNAL.

FINANCE & MARKETS

President to Name U.S. Bank Regulator

Currency comptroller Mr. Curry was appointed by lawyer Jay Clayton, advanced
Mr. Obama to a five-year term closer to final confirmation on
chief to be replaced; that expired in April. Mr. Monday by the Senate, with a
move signals direction Curry can continue serving final vote expected later this
until the administration re- week. The SEC has two addi-
of financial oversight places him, and he has said he tional vacancies on its five-
intends to do so. member commission.
BY RYAN TRACY People familiar with the Mr. Trump also has nomi-
matter said Mr. Trump is con- nated Christopher Giancarlo
WASHINGTON—The Trump sidering for the job Joseph Ot- to head the Commodity Fu-
administration, looking to ting, a former banker who tures Trading Commission,
make its first major imprint worked with Treasury Secre- and he is awaiting Senate ac-
on U.S. banking regulators, is tary Steven Mnuchin at One- tion.
preparing to replace Comp- West Bank. Mr. Otting hasn’t Mr. Giancarlo began serving
troller of the Currency been formally nominated for as acting CFTC chairman the
Thomas Curry as chief over- the job, which requires Senate day of Mr. Trump’s inaugura-
seer of federally chartered confirmation. tion on Jan. 20. The CFTC has
banks, according to people fa- In the meantime, Mr. three additional openings.
miliar with the matter. Trump has the power to put Mr. Noreika could begin

MICHAEL NAGLE/BLOOMBERG NEWS

President Donald Trump his stamp on the comptroller’s work immediately at the OCC
could soon replace Mr. Curry office under the National Bank but is expected to serve tem-
with an acting head of the Act, the law that created the porarily, these people said.
agency, who would serve until office in the 1860s. The law That is because the person
a new comptroller is con- gives the president wide lati- nominated to be comptroller
firmed, these people said. The tude to remove the comptrol- likely couldn’t simultaneously
change could happen as soon ler “upon reasons to be com- hold that job in an acting ca-
as this week, they said. municated by him to the pacity.
A White House spokes- Senate,” and effectively gives Mr. Curry, a former state
woman declined to comment, the Treasury secretary power Thomas Curry, comptroller of the currency for the U.S. Department of Treasury, is to be replaced. regulator, has used the comp-
as did a spokesman for Mr. to designate an acting comp- troller’s post to harangue
Curry. troller. struck a deregulatory tone rules rests mostly with other fire its director, Richard large U.S. banks about risky
The comptroller oversees The administration is con- that has boosted bank stocks agencies. Cordray, but he hasn’t done lending, anti-money-launder-
hundreds of bank supervisors sidering naming as acting and expectations of policies At the Fed, the key post of so. Such a move would likely ing systems, community rein-
stationed inside large U.S. fi- comptroller Keith Noreika, a that will give financial firms vice chairman in charge of spark a big political fight with vestment and other matters.
nancial firms, making the job banking lawyer at Simpson more leeway than they en- bank oversight remains va- Democrats. He has also recently moved
one of the most powerful U.S. Thacher & Bartlett LLP, ac- joyed under Mr. Obama. With- cant. Mr. Trump hasn’t ap- A federal lawsuit is pending to begin allowing financial
bank regulators. Mr. Trump cording to people familiar out financial regulators in pointed anyone to that post that involves a question on technology firms more leeway
has said he wants to remove with the matter. place, however, the practical despite repeated assurances whether the president has the in applying for federal bank-
regulations affecting banks, Mr. Otting couldn’t be influence of his electoral win by administration officials power to remove the director ing charters.
but his influence has been lim- reached to comment. has been limited. that they would act quickly to at will. Mr. Trump’s choice for the
ited so far: Appointees of Mr. Noreika didn’t respond The Treasury Department, fill it. The seven-member Fed Regulators over the finan- job is expected to take a less
President Barack Obama still to requests to comment. He for example, is conducting a governing board has three va- cial markets also are awaiting aggressive tack on bank over-
serve in every major bank reg- served on Mr. Trump’s transi- broad review of financial reg- cancies, including the vice administration leadership. Mr. sight, in line with the adminis-
ulatory post, including at the tion team as a volunteer at ulations with an eye toward chairman’s job. Trump’s nominee for chair- tration’s view that Obama-era
Federal Reserve and Consumer the Treasury. undoing Obama-era financial Some critics of the CFPB man of the Securities and Ex- regulators placed too many re-
Financial Protection Bureau. Mr. Trump has broadly rules, but the power to alter have hoped Mr. Trump would change Commission, securities strictions on banks.

KUSHNER wife, Ivanka Trump, were hired

by her father, President Donald
Trump, to be senior aides.
Continued from page B1 White House officials have said
cally need to be disclosed. some of the sales were needed
They said Mr. Kushner didn’t to avoid potential conflicts be-
appear to violate disclosure tween Mr. Kushner’s far-reach-
rules by not publicly reporting ing job duties and his personal
his business-related debts and financial interests.
guarantees. But they said such He is retaining more than
arrangements ideally should 200 other assets, worth a total
be disclosed, in part because of at least $116 million, ac-
they could force Mr. Kushner cording to his disclosures.
to recuse himself from certain These are mostly apartments
issues involving the lenders. and office blocks around the
“Anything that presents a po- U.S. Like his father-in-law, Mr.
tential for the conflict of inter- Kushner has declined to put
est should be disclosed so that these assets in a blind trust,
the public and the press can which ethics experts regard as
monitor this,” Mr. Potter said.
the cleanest way to avoid con-
Ethics experts’ concern is flicts of interest. Someone
that Mr. Kushner’s business close to Mr. Kushner said
connections could jeopardize there are practical problems
his impartiality in certain ar- that made a blind trust not a
eas and that, absent disclo- realistic option.
sures, the public is in the dark Mr. Kushner co-founded
about potential conflicts. Cadre in 2014 with his brother,
Mr. Kushner’s rapidly ex- Joshua Kushner, and Ryan Wil-
panding responsibilities range liams, a 29-year-old friend and
from working on a Middle East former employee of Kushner
peace deal to making the fed- Cos., the family-controlled
eral government operate more business that Mr. Kushner ran
efficiently. As a senior federal until recently. Cadre markets
official, Mr. Kushner is bound properties to prospective in-
by ethics laws that require vestors, who can put their
him to recuse himself from money into specific buildings
matters that would directly af- or into an investment fund run
fect his financial interests. by Cadre, which collects fees
Ms. Gorelick, who was dep- on each deal.
uty attorney general in former To get off the ground,
President Bill Clinton’s admin- Cadre turned to a Goldman
istration, said Mr. Kushner will Sachs fund and a number of
“recuse consistent with gov- high-profile investors. Among
ernment ethics rules.” them were the venture-capital
Mr. Kushner, the 36-year-old firms of Mr. Thiel, Silicon Val-
scion of a real-estate family, ley’s most prominent sup-
agreed with federal ethics offi- porter of the GOP president,
cials to divest himself of more and Vinod Khosla, a co-
than 80 assets after he and his founder of Sun Microsystems
Cadre’s Connections
Jared Kushner, a senior White House official, has a stake in
didn’t respond to requests to
comment on their backing of
Cadre, but a person familiar
yer said holds his Cadre stake,
is shown on his financial-dis-
closure form as owning un-
real-estate company Cadre, as do Goldman Sachs and billionaires with Mr. Soros’s family office specified New York real estate
such as George Soros. said it had invested in early valued at more than $50 mil-
2015 before Mr. Trump de- lion. The form adds that “the
clared his presidential candi- conflicting assets of this inter-
dacy. est have been divested.”
President’s Cadre has solicited money Beyond Cadre, some of the
PHOTO son-in-law and PHOTO from investors for several assets Mr. Kushner is holding
senior adviser Kushner Cos. real-estate proj- on to are hard to pinpoint,
ects, according to information partly because they are
sent to prospective investors housed in entities with generic
Jared Owns President and reviewed by the Journal. names such as “KC Dumbo Of-
Kushner Donald Trump Jared Kushner personally has fice,” according to the disclo-
stakes in some of the real-es- sure form.
George
BFPS
Soros’s
tate projects for which Cadre The Journal matched many
Ventures has raised money, according to of the assets to specific real-
family
LLC Peter Cadre documents and his dis- estate investments. An analy-
A Goldman office
Thiel’s
Sachs fund
closure form. sis of the debts on those prop-
venture
firm While Mr. Williams acts as erties, using real-estate data
Part Part the public face of Cadre, Mr. services PropertyShark and
owner owner* Kushner remains one of the Trepp LLC as well as property
Daniel Part Part Vinod
Och’s owner owner Khosla’s
owners, with the power to “in- records, found ties to a broad
family Part venture fluence the [firm’s] manage- swath of U.S. and foreign
Part
office owner owner firm ment or policies,” according to banks, private-equity firms,
the latest public information real-estate companies and
on file with the Financial In- government-owned lenders.
dustry Regulatory Authority. Lenders to Mr. Kushner, ei-
Quadro Owns Cadre
Partners Jared Kushner’s company JCK ther directly or via properties
(RealCadre
Inc. LLC) Cadre LLC is shown as owning he co-owns, include Bank of
25% to 50% of Quadro Part- America Corp., Blackstone
ners Inc., which owns at least Group LP, Citigroup Inc., UBS
75% of RealCadre LLC, which Group AG, Deutsche Bank AG
*Soros also provided a $250 million credit line.
does business as Cadre. Mr. and Royal Bank of Scotland
Sources: Financial Industry Regulatory Authority; Mr. Kushner’s lawyer; Cadre; people close to Kushner has reduced his own- Group PLC. Royal Bank of
Cadre; Associated Press (Kushner photo); Agence France-Presse/Getty Images (Trump photo) ership stake to less than 25%, Scotland didn’t respond to re-
THE WALL STREET JOURNAL. his lawyer Ms. Gorelick said. quests for comment; represen-
Mr. Williams, chief execu- tatives of the other firms de-
Inc., according to Cadre’s web- Cadre also secured a $250 tive of Cadre, said the com- clined to comment.
site. Other backers include million line of credit from the pany has been working with Mr. Kushner will recuse
Chinese entrepreneur David family office of George Soros, regulators to update its public himself from matters to which
Yu, co-founder with Alibaba a top Democratic donor whom filings to “reflect Jared’s non- Deutsche Bank or RBS are par-
Group Holding Ltd.’s Jack Ma Mr. Trump criticized during operational, nonmanagement ties because he has provided
of a Shanghai-based private- his presidential campaign, the relationship with the company, personal guarantees on their
equity firm, hedge-fund man- people close to the company which has been in place since loans, said a person familiar
ager Daniel Och and real-es- said. Mr. Soros’s family office the inauguration.” with his ethics arrangement.
tate magnate Barry Sternlicht, is also an investor in Cadre. BFPS Ventures, the com- —Coulter Jones
people close to Cadre said. The investors declined or pany that Mr. Kushner’s law- contributed to this article.

Och-Ziff Capital Is Hit Step Toward Sale of Logicor

BY PETER GRANT

With More Redemptions

Blackstone also has been faster.
talking with three different in- Blackstone created Logicor
Blackstone Group LP has vestment groups about possi- partly on the assumption that
taken new steps to sell its Eu- bly selling Logicor to them in online retail would boost de-
BY GEOFFREY ROGOW $7.2 million, or 4 cents a ropean warehouse business in a private transaction, people mand for warehouses and dis-
share, compared with a year- an initial public offering that tribution centers.
Investors pulled nearly $7 earlier loss of $69.4 million, or could fetch as much as $13 bil- That bet appears to be pay-
billion from the largest pub- 38 cents a share. Distributable lion, according to people fa- ing off. Last year, a record
licly traded hedge-fund firm in earnings were $35.7 million, or miliar with the matter.
Blackstone hires €12.9 billion ($14.1 billion)
the U.S. in the first four 7 cents a share, compared The private-equity giant, advisers for an IPO worth of logistics properties
months of 2017, the latest sign with a loss of $142.5 million, which began accumulating Eu- were sold, up from €12 billion
of investor disillusionment or 27 cents a share, a year ropean logistics properties in
of its European in 2015, according to Real Cap-
logistics business.
AMANDA GORDON/BLOOMBERG NEWS

with Wall Street’s most promi- earlier. Analysts had expected 2012 in a company named Logi- ital Analytics.
nent money managers. the company to post a profit cor, has tapped Goldman Sachs Blackstone pulled off a sim-
Och-Ziff Capital Manage- of 2.5 cents a share. Group Inc. and PJT Partners ilar strategy in the U.S., where
ment Group LLC said Tues- Management fees, excluding Inc. to work on the IPO. it began building a logistics
day that it received net re- certain items, dropped 44% to The offering of the com- familiar with the matter said. properties company named In-
demptions of $4.8 billion in $80.8 million, hitting the com- pany, which operates more Blackstone prefers this option, dCor Properties in 2010. The
the first quarter and $2.1 bil- pany’s bottom line. than 630 properties, could which would eliminate the firm in late 2014 sold IndCor
lion from April 1 to May Founder Daniel Och, 56 take place as soon as this need for an IPO and would al- to GIC, Singapore’s sovereign-
1. That follows $8 billion in re- years old and long one of the summer. low the firm to sell its shares wealth fund, for $8.1 billion.
demptions during 2016. Total hedge-fund world’s quiet stars,
assets at the firm fell 24% told analysts Tuesday that a
INTERNATIONAL INVESTMENT FUNDS
Daniel Och says the redemption
from a year earlier to $32 bil- cycle has largely ended. redemption cycle that began Advertisement
lion as of May 1. in the second quarter of last
Shares of the company demptions last year, according year has largely ended.
dropped 3.1% Tuesday and to industry tracker HFR Inc. “We are one quarter away [ Search by company, category or country at europe.WSJ.com/funds ]
have declined about 41% over Individual issues have also from substantially all clients
the past year. put Och-Ziff in a difficult posi- having had the ability to re- NAV —%RETURN—
FUND NAME GF AT LB DATE CR NAV YTD 12-MO 2-YR
Och-Ziff isn’t alone in post- tion. The firm last year agreed deem since the cycle began,
n Chartered Asset Management Pte Ltd - Tel No: 65-6835-8866
ing continued outflows as in- to pay $412 million after a and from that point forward Fax No: 65-6835 8865, Website: www.cam.com.sg, Email: cam@cam.com.sg
vestors have pulled capital subsidiary pleaded guilty to we believe that multistrategy CAM-GTF Limited OT OT MUS 04/21 USD 310167.83 2.7 7.3 -5.0
from hedge funds for a record conspiracy to commit bribery flows will return to being
five consecutive quarters. The in Africa. driven by performance and Data as shown is for information purposes only. No offer is being made by
Morningstar, Ltd. or this publication. Funds shown aren’t registered with the
For information about listing your funds,
$3 trillion hedge-fund industry In its quarterly earnings re- general industry trends,” he U.S. Securities and Exchange Commission and aren’t available for sale to United
States citizens and/or residents except as noted. Prices are in local currencies.
please contact: Freda Fung tel: +852 2831
received $70 billion in re- port, Och-Ziff posted a loss of said. All performance figures are calculated using the most recent prices available. 2504; email: freda.fung@wsj.com
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
THE WALL STREET JOURNAL.
Berkshire Pressed on Political Spending
Shareholder advisory
firms say company led
by Buffett should
disclose contributions
BY NICOLE FRIEDMAN
Berkshire Hathaway Inc.
has largely avoided politics,
but the pressure for more dis-
closure is increasing.
Shareholder advisory firms
Glass Lewis & Co. and Institu-
tional Shareholder Services
Inc. are recommending that
Berkshire shareholders ap-
prove a resolution asking for a
twice-yearly report on the
company’s political contribu-
tions and expenditures. Berk-
shire is run by billionaire War-
ren Buffett, a longtime
Democrat.
Berkshire’s board opposes
the resolution, arguing that
political contributions make
up less than 0.1% of Berk-
shire’s annual expenditures
and the parent company
doesn’t make any contribu-
tions.
Berkshire subsidiaries in-
cluding BNSF Railway and
Berkshire Hathaway Energy do
make political contributions.
The vote on the matter will be
finalized Saturday at the com-
pany’s widely attended annual
meeting in Omaha, Neb.
Mastercard Posts Better-Than-Expected Results
BY ANNAMARIA ANDRIOTIS
Mastercard Inc. posted
higher-than-expected revenue
and earnings per share for the
first quarter because of an in-
crease in transactions and vol-
ume growth on its network.
The card network also re-
ported an increase in expenses
as it continues to invest in dig-
ital-payment technology and
security features to bring
down fraud in the card space.
Net revenue totaled $2.73
billion, up 12% from a year be-
fore. Earnings per share came
Warren Buffett spoke with CNBC in February. Berkshire’s board opposes a resolution on disclosure.
Glass Lewis and ISS say the
company’s current disclosures
are insufficient and the
board’s oversight of political
spending is unclear.
“Berkshire Hathaway—the
parent company—has never
made a contribution to any
presidential candidate (nor
any other political candidate)
during my 52 years as CEO,”
Mr. Buffett said in an email. “I
am sure that some of our sub-
in at $1. Analysts expected
$2.65 billion in revenue and 95
cents in earnings per share.
Net income totaled $1.1 billion,
just shy of analyst estimates.
Mastercard’s shares were up
1.6% in midday trading Tues-
day.
Net revenue increased in
part because of a rise in the
dollar amount of transactions
processed over Mastercard’s
network. Gross dollar volume
passing over the network
world-wide was $1.18 trillion,
up 5% from a year ago. Net
revenue also increased due to
FINANCE & MARKETS
sidiaries—in particular those
in heavily regulated indus-
tries—make political contribu-
tions and employ lobbyists. I
do not participate in these de-
cisions and Berkshire parent
has never, to my knowledge,
used a lobbyist.”
Mr. Buffett said he and
Berkshire’s vice chairman,
Charles Munger, have never
solicited political contribu-
tions from a Berkshire em-
a rise in card-transaction vol-
ume from cardholders travel-
ing abroad, for which Master-
card derives larger fees.
Net revenue increases were
partially offset by a rise in re-
bates and incentives. They
rose 23% from the first quarter
of last year to $1.28 billion, al-
though that was below some
analysts’ expectations.
Mastercard pays incentives
for new agreements with
banks that issue cards for
transactions that run over its
network. Those incentives can
include marketing costs. There
Wednesday, May 3, 2017 | B7
Political-contribution re-
porting is a common topic for
shareholder resolutions, and
Glass Lewis said it supported
about half of such proposals
last year. ISS said its policy is
to generally support increased
disclosure of political spend-
ing.
Shareholder resolutions are
unlikely to pass at Berkshire,
where Mr. Buffett, the com-
pany’s chairman, controls
32.7% of the voting power. In
his recent annual letter to
shareholders, Mr. Buffett said
that the proponents of share-
RYAN SODERLIN/ASSOCIATED PRESS
holder resolutions “will be
given a reasonable amount of
time to state their case” at the
meeting.
Mr. Buffett weighs in on po-
litical issues from time to time
and donates his own money—
not Berkshire’s—to causes and
candidates he supports. He
also donates $5,000 a year to
BNSF’s political-action com-
ployee or vendor. mittee, he said.
“Over the decades, I’ve He campaigned for Hillary
learned of a couple of our exec- Clinton and criticized Presi-
utives that were doing so and dent Donald Trump before
have told them to stop,” he said. November’s presidential elec-
The resolution was pro- tion. But since then, he has
posed by Clean Yield Asset mostly stuck to conciliatory
Management on behalf of remarks.
shareholders Tom Beers and A few days after the elec-
Mary Durfee. tion, Mr. Buffett told CNN that
Clean Yield has proposed Mr. Trump “deserves every-
similar resolutions at other body’s respect.”
companies. He has spoken positively
were 2.4 billion Mastercard ment in digital, including digi-
cards in existence as of the tal-payment platform Master-
first quarter, up 5% from a pass. This platform is meant to
year before. speed up consumers’ pur-
Mastercard Chief Executive chases. The biggest increase in
Ajay Banga said on an earnings expenses occurred in advertis-
call that the company in the ing and marketing. Those costs
U.S. renewed certain card were also connected to con-
agreements with Capital One tinuing efforts to expand Mas-
Financial Corp., Bank of the terpass usage.
West and Citizens Financial Mastercard completed the
Group Inc. acquisition of VocaLink last
While revenue rose, so did week after a U.K. regulator
expenses; at $1.2 billion they cleared the way for the deal
were up 12% from the year- earlier in April. VocaLink is
earlier period. That was the one of the primary ATM net-
result of continuing invest- work providers in the U.K., and
Carry the
Square Mile
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about immigration in recent
months but hasn’t directly ad-
dressed the current adminis-
tration’s actions.
Mr. Munger criticized Mr.
Trump before the election but
has offered measured praise
since then.
“The Trump administration
has learned a hell of a lot,” Mr.
Munger said in an interview
last month. “It isn’t like
they’re a bunch of crazy idiots.
So I’m encouraged.”
Berkshire was a big benefi-
ciary of the postelection stock
rally, with its shares climbing
to records.
Some of the Trump admin-
istration’s proposed policies
could benefit Berkshire, in-
cluding a lower corporate tax
rate and increased infrastruc-
ture spending. Mr. Buffett said
he expects to receive ques-
tions about such policies at
the annual meeting, and that
“the answers are not always
simple.”
But Mr. Munger said that
Berkshire has no official posi-
tion on political issues and he
doesn’t expect to talk much
about politics at the annual
meeting.
“The TV is politics all day.
Why would we want to turn
the Berkshire meeting into
politics?” he said. “Berkshire
is the least political company
you’re going to find.”
its technology also allows for
real-time payments from one
account to another.
That leaves the door open
for new types of consumer
payment scenarios to occur
over Mastercard’s system.
“We believe that the combi-
nation of card rails and ac-
count rails will enable us to
look at payments more holisti-
cally that have to be done in
the retail space,” the business-
to-business and person-to-per-
son segments, finance chief
Martina Hund-Mejean said in
an interview.
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
B8 | Wednesday, May 3, 2017 THE WALL STREET JOURNAL.

MARKETS DIGEST
Nikkei 225 Index STOXX 600 Index S&P 500 Index Data as of 4 p.m. New York time
Last Year ago
19445.70 s 135.18, or 0.70% Year-to-date s 1.73% 389.53 s 2.89, or 0.75% Year-to-date s 7.78% 2391.17 s 2.84, or 0.12% Trailing P/E ratio * 24.17 24.12
High, low, open and close for each 52-wk high/low 19633.75 14952.02 High, low, open and close for each 52-wk high/low 389.53 308.75 High, low, open and close for each P/E estimate * 18.42 17.65
trading day of the past three months. All-time high 38915.87 12/29/89 trading day of the past three months. All-time high 414.06 4/15/15 trading day of the past three months. Dividend yield 1.97 2.19
All-time high: 2395.96, 03/01/17

* P/E data based on as-reported earnings from Birinyi Associates Inc.

20000 390 2390

65-day moving average 19500 380 2350

19000 370 2310

18500 360 2270

Session high
DOWN UP 65-day moving average
t

Session open Close 18000 350 2230

Close Open 65-day moving average
t

17500 340 2190

Session low
Bars measure the point change from session's open
17000 330 2150
Jan. Feb. Mar. Apr. Jan. Feb. Mar. Apr. Jan. Feb. Mar. Apr.

International Stock Indexes Data as of 4 p.m. New York time Global government bonds
Latest 52-Week Range YTD Latest, month-ago and year-ago yields and spreads over or under U.S. Treasurys on benchmark two-year
Region/Country Index Close NetChg % chg Low Close High % chg and 10-year government bonds around the world. Data as of 3 p.m. ET
World The Global Dow 2740.98 7.41 0.27 2193.75 • 2741.83 8.4 Country/ Spread Over Treasurys, in basis points Yield
MSCI EAFE 1849.27 10.51 0.57 1471.88 • 1956.39 7.7 Coupon Maturity, in years Yield Latest Previous Month Ago Year ago Previous Month ago Year ago
MSCI EM USD 988.46 8.70 0.89 691.21 • 1044.05 24.5 5.250 Australia 2 1.681 42.7 39.1 50.4 108.6 1.673 1.758 1.883
4.750 10 2.610 31.4 26.1 31.6 65.9 2.581 2.702 2.533
Americas DJ Americas 575.53 0.59 0.10 480.90 • 577.99 6.5
3.000 Belgium 2 -180.9 -183.8 -178.2 -126.1 -0.556 -0.528 -0.464
-0.555
Brazil Sao Paulo Bovespa 66608.91 1205.67 1.84 48066.67 • 69487.58 10.6
0.800 10 0.757 -153.9 -153.8 -154.7 -139.0 0.782 0.839 0.484
Canada S&P/TSX Comp 15616.61 40.98 0.26 13535.54 • 15943.09 2.2
0.000 France 2 -0.454 -170.8 -173.8 -172.4 -119.2 -0.457 -0.470 -0.395
Mexico IPC All-Share 49563.19 301.86 0.61 43902.25 • 50147.04 8.6
1.000 10 0.817 -147.8 -147.9 -142.7 -126.9 0.841 0.959 0.606
Chile Santiago IPSA 3751.56 63.09 1.71 2998.64 • 3786.05 16.4
0.000 Germany 2 -0.721 -197.5 -200.9 -199.6 -128.3 -0.727 -0.742 -0.485
U.S. DJIA 20949.89 36.43 0.17 17063.08 • 21169.11 6.0
0.250 10 0.330 -196.6 -199.7 -205.7 -162.4 0.323 0.329 0.250
Nasdaq Composite 6095.37 3.76 0.06 4574.25 • 6102.72 13.2
0.300 Italy 2 -0.083 -133.7 -136.4 -131.5 -83.3 -0.082 -0.061 -0.035
S&P 500 2391.17 2.84 0.12 1991.68 • 2400.98 6.8
2.200 10 2.299 0.3 -3.8 -24.3 -39.4 2.282 2.143 1.481
CBOE Volatility 10.50 0.39 3.86 9.90 • 26.72 –25.2
0.100 Japan 2 -0.201 -145.5 -148.6 -144.7 -103.7 -0.204 -0.193 -0.240
EMEA Stoxx Europe 600 389.53 2.89 0.75 308.75 • 389.53 7.8 0.100 10 0.020 -227.6 -230.5 -231.7 -198.4 0.016 0.069 -0.110
Stoxx Europe 50 3197.87 19.72 0.62 2626.52 • 3199.61 6.2 4.000 Netherlands 2 -0.633 -188.7 -194.0 -196.6 -126.1 -0.659 -0.712 -0.464
Austria ATX 3012.58 2.40 0.08 1981.93 • 3017.21 15.1 0.750 10 0.547 -174.9 -177.1 -180.9 -152.5 0.549 0.577 0.349
Belgium Bel-20 3909.88 34.35 0.89 3127.94 • 3910.69 8.4 4.750 Portugal 2 0.356 -89.8 -91.9 -139.9 -42.6 0.363 -0.145 0.372
France CAC 40 5304.15 36.82 0.70 3955.98 • 5305.95 9.1 4.125 10 3.551 125.6 120.8 126.0 109.1 3.528 3.645 2.966
Germany DAX 12507.90 69.89 0.56 9214.10 • 12511.17 8.9 2.750 Spain 2 -0.273 -152.7 -152.5 -144.0 -86.7 -0.244 -0.186 -0.069
Greece ATG 733.93 21.76 3.06 517.10 • 737.75 14.0 1.500 10 1.646 -65.0 -68.5 -74.0 -29.4 1.635 1.645 1.581
Hungary BUX 32902.62 –53.68 –0.16 25126.36 • 34334.92 2.8 4.250 Sweden 2 -0.655 -190.9 -195.6 -186.5 -120.1 -0.675 -0.611 -0.404
Israel Tel Aviv 1398.75 … Closed 1372.23 • 1490.23 –4.9 1.000 10 0.593 -170.3 -175.3 -178.5 -101.0 0.567 0.601 0.865
Italy FTSE MIB 20733.25 124.09 0.60 15017.42 • 20883.66 7.8 1.750 U.K. 2 0.081 -117.3 -120.8 -112.5 -27.6 0.074 0.129 0.522
Netherlands AEX 525.48 4.35 0.83 409.23 • 526.25 8.8 4.250 10 1.091 -120.5 -123.2 -124.4 -27.5 1.088 1.142 1.600
Poland WIG 62066.66 422.10 0.68 42812.99 • 62214.81 19.9 1.250 U.S. 2 1.254 ... ... ... ... 1.282 1.254 0.798
Russia RTS Index 1120.22 5.79 0.52 873.58 • 1196.99 –2.8 2.250 10 2.296 ... ... ... ... 2.320 2.386 1.874
Spain IBEX 35 10820.30 104.50 0.98 7579.80 • 10828.80 15.7
Sweden SX All Share 586.55 3.86 0.66 443.66 • 586.55 9.7 Commodities Prices of futures contracts with the most open interest 3:30 p.m. New York time
Switzerland Swiss Market 8868.56 55.89 0.63 7475.54 • 8868.56 7.9 EXCHANGE LEGEND: CBOT: Chicago Board of Trade; CME: Chicago Mercantile Exchange; ICE-US: ICE Futures U.S.; MDEX: Bursa Malaysia
South Africa Johannesburg All Share 53915.64 98.33 0.18 48935.90 • 54704.22 6.4 Derivatives Berhad; TCE: Tokyo Commodity Exchange; COMEX: Commodity Exchange; LME: London Metal Exchange;
NYMEX: New York Mercantile Exchange; ICE-EU: ICE Futures Europe. *Data as of 4/28/2017
Turkey BIST 100 94355.91 –299.40 –0.32 70426.16 • 95358.76 20.8
One-Day Change Year Year
U.K. FTSE 100 7250.05 46.11 0.64 5788.74 • 7447.00 1.5 Commodity Exchange Last price Net Percentage high low
372.25 -5.25 -1.39% 393.75 360.75
Asia-Pacific DJ Asia-Pacific TSM 1579.41 7.06 0.45 1308.52 • 1581.47 11.0 Corn (cents/bu.) CBOT
Soybeans (cents/bu.) 969.25 -1.00 -0.10 1,092.50 941.25
Australia S&P/ASX 200 5950.40 –6.10 –0.10 5103.30 • 5956.50 5.0
Wheat (cents/bu.)
CBOT
CBOT 453.50 -2.50 -0.55 488.75 416.00
China Shanghai Composite 3143.71 –10.95 –0.35 2806.91 • 3288.97 1.3
Live cattle (cents/lb.) CME 127.075 2.950 2.38% 127.125 103.150
Hong Kong Hang Seng 24696.13 81.00 0.33 19694.33 • 24698.48 12.3
Cocoa ($/ton) ICE-US 1,800 -12 -0.66 2,270 1,756
India S&P BSE Sensex 29921.18 2.78 0.01 25101.73 • 30133.35 12.4
Coffee (cents/lb.) ICE-US 136.30 0.45 0.33 161.55 128.65
Japan Nikkei Stock Avg 19445.70 135.18 0.70 14952.02 • 19633.75 1.7
Sugar (cents/lb.) ICE-US 15.91 -0.27 -1.67 20.81 15.35
Singapore Straits Times 3211.11 35.67 1.12 2729.85 • 3211.11 11.5
Cotton (cents/lb.) ICE-US 79.22 0.27 0.34 80.27 71.86
South Korea Kospi 2219.67 14.23 0.65 1925.24 • 2219.67 9.5 Robusta coffee ($/ton) ICE-EU 1997.00 51.00 2.62 2,283.00 1,871.00
Taiwan Weighted 9941.27 69.27 0.70 8053.69 • 9972.49 7.4
Copper ($/lb.) COMEX 2.6380 -0.0225 -0.85 2.8400 2.4905
Source: SIX Financial Information;WSJ Market Data Group Gold ($/troy oz.) COMEX 1257.60 2.10 0.17 1,297.40 1,152.20
Silver ($/troy oz.) COMEX 16.845 0.003 0.02 18.725 16.100
Currencies London close on May 2 Aluminum ($/mt)* LME 1,962.00 -2.00 -0.10 1,972.00 1,688.50
Tin ($/mt)* LME 19,825.00 40.00 0.20 21,225.00 18,760.00
Yen, euro vs. dollar; dollar vs. major U.S. trading partners US$vs,
Tue YTDchg Copper ($/mt)* LME 5,712.00 7.00 0.12 6,156.00 5,518.00
Country/currency in US$ per US$ (%) Lead ($/mt)* LME 2,205.00 19.50 0.89 2,445.00 2,022.00
20%
Europe Zinc ($/mt)* LME 2,620.00 -5.00 -0.19 2,958.50 2,555.00
Yen Bulgaria lev 0.5578 1.7928 –3.5 Nickel ($/mt)* LME 9,225.00 -105.00 -1.13 11,095.00 9,225.00
10
0.1462 6.841 –4.6
s
s Croatia kuna Rubber (Y.01/ton) TCE 221.70 6.10 2.83 n.a. n.a.
WSJ Dollar index Euro zone euro 1.0913 0.9164 –3.6
0 Palm oil (MYR/mt) MDEX 2546.00 38.00 1.52 3,004.00 2,450.00
Czech Rep. koruna-b 0.0406 24.651 –4.0
Denmark krone 0.1467 6.8149 –3.6 Crude oil ($/bbl.) NYMEX 47.65 -1.19 -2.44 57.95 47.35
–10 s Euro
Hungary forint 0.003495 286.14 –2.8 NY Harbor ULSD ($/gal.) NYMEX 1.4704 -0.0174 -1.17 1.7833 1.4618
Iceland krona 0.009418 106.18 –6.0 RBOB gasoline ($/gal.) NYMEX 1.5158 -0.0114 -0.75 1.9012 1.5075
–20 Norway krone 0.1164 8.5945 –0.6
0.2595 3.8533 –8.0
Natural gas ($/mmBtu) NYMEX 3.189 -0.026 -0.81 3.5410 2.8170
2016 2017 Poland zloty
Russia ruble-d 0.01754 57.007 –7.0 Brent crude ($/bbl.) ICE-EU 50.45 -1.07 -2.08 60.09 50.14
US$vs, US$vs,
YTDchg YTDchg Sweden krona 0.1133 8.8272 –3.1 Gas oil ($/ton) ICE-EU 444.00 -5.75 -1.28 526.50 441.75
Tue Tue
Country/currency in US$ per US$ (%) Country/currency in US$ per US$ (%) Switzerland franc 1.0081 0.9920 –2.6
Turkey lira 0.2839 3.5226 –0.03 Sources: SIX Financial Information; WSJ Market Data Group
Americas Hong Kong dollar 0.1285 7.7811 0.3
Ukraine hryvnia 0.0377 26.5450 –2.0
Argentina peso-a 0.0654 15.2952 –3.6
India rupee
Indonesia rupiah
0.0156
0.0000751
64.1699
13312
–5.6
–1.6
U.K. pound 1.2918 0.7741 –4.4 Cross rates London close on May 2
Brazil real 0.3159 3.1657 –2.7 Middle East/Africa
Japan yen 0.008921 112.09 –4.2
Canada dollar 0.7279 1.3739 2.2 USD GBP CHF JPY HKD EUR CDN AUD
Kazakhstan tenge 0.003170 315.43 –5.5 Bahrain dinar 2.6525 0.3770 –0.05
Chile peso 0.001497 667.80 –0.3 Australia 1.3294 1.7170 1.3401 0.0119 0.1708 1.4505 0.9676 ...
Macau pataca 0.1245 8.0330 1.5 Egypt pound-a 0.0552 18.1043 –0.2
Colombia peso 0.0003393 2946.94 –1.8 Canada 1.3739 1.7745 1.3847 0.0123 0.1766 1.4990 ... 1.0334
Malaysia ringgit-c 0.2314 4.3218 –3.7 Israel shekel 0.2772 3.6080 –6.2
Ecuador US dollar-f 1 1 unch
New Zealand dollar 0.6922 1.4447 0.04 Kuwait dinar 3.2849 0.3044 –0.4 Euro 0.9164 1.1838 0.9237 0.0082 0.1178 ... 0.6670 0.6893
Mexico peso-a 0.0533 18.7768 –9.4
Pakistan rupee 0.0095 104.785 0.4 Oman sul rial 2.5974 0.3850 0.01 Hong Kong 7.7811 10.0523 7.8446 0.0694 ... 8.4918 5.6637 5.8537
Peru sol 0.3078 3.2493 –3.1
Philippines peso 0.0200 50.025 0.8 Qatar rial 0.2746 3.642 0.04 Japan 112.0920 144.8200 113.0200 ... 14.4060 122.3600 81.6100 84.3400
Uruguay peso-e 0.0356 28.110 –4.2
Singapore dollar 0.7168 1.3951 –3.6 Saudi Arabia riyal 0.2666 3.7505 –0.01 0.9920 1.2814 ... 0.0088 0.1275 1.0826 0.7222 0.7464
Venezuela bolivar 0.099960 10.00 0.1 Switzerland
South Korea won 0.0008851 1129.79 –6.5 South Africa rand 0.0752 13.3026 –2.9
U.K. 0.7741 ... 0.7804 0.0069 0.0995 0.8450 0.5635 0.5823
Asia-Pacific Sri Lanka rupee 0.0065764 152.06 2.4 Close Net Chg % Chg YTD % Chg
0.7522 1.3294 –4.3 Taiwan dollar 0.03332 30.015 U.S. ... 1.2918 1.0081 0.0089 0.1285 1.0913 0.7279 0.7522
Australia dollar –7.5 WSJ Dollar Index 89.75 –0.04 –0.05 –3.43
China yuan 0.1450 6.8969 –0.7 Thailand baht 0.02899 34.490 –3.7 Sources: Tullett Prebon, WSJ Market Data Group Source: Tullett Prebon

Key Rates Top Stock Listings 4 p.m. New York time

Latest 52 wks ago % YTD% % YTD% % YTD%
Libor Cur Stock Sym Last Chg Chg Cur Stock Sym Last Chg Chg Cur Stock Sym Last Chg Chg Asia Titans 50
One month 0.99278% 0.43590% ¥ TakedaPharm 4502 5376.00 0.50 11.19 £ RoyDtchShell A RDSA 2012.00 0.47 -10.28 Last: 156.31 s 0.35, or 0.22% YTD s 10.9%
Three month 1.17372 0.63290 Asia Titans HK$ TencentHoldings 0700 248.40 2.05 30.94 € SAP SAP 92.80 0.79 12.06
Six month 1.43239 0.90715 HK$ AIAGroup 1299 54.75 1.67 25.14 ¥ TokioMarineHldg 8766 4751.00 0.57 -0.94 € Sanofi SAN 87.58 1.12 13.89 165
One year 1.78011 1.23180 ¥ AstellasPharma 4503 1434.50 0.21 -11.64 ¥ ToyotaMtr 7203 6143.00 1.67 -10.69 € SchneiderElectric SU 72.30 -0.28 9.36 High 50–day 160
132.70 0.84 13.61 Close moving average
Euro Libor AU$ AustNZBk ANZ 32.25 -2.12 6.02 AU$ Wesfarmers WES 43.31 -0.69 2.78 € Siemens SIE
155
One month -0.40143% -0.34929% AU$ BHP BHP 23.76 -0.50 -5.19 AU$ WestpacBanking WBC 34.98 -0.91 7.30 CHF Syngenta SYNN 462.50 0.02 14.91 Low t
Three month -0.36214 -0.27386 HK$ BankofChina 3988 3.75 -0.53 9.01 AU$ Woolworths WOW 27.35 1.18 13.49 € Telefonica TEF 10.32 1.62 17.01 150
Six month -0.26157 -0.15514 HK$ CKHutchison 0001 97.75 0.62 11.21 € Total FP 46.84 -0.69 -2.89 145
One year -0.14329 -0.02914 HK$ CNOOC 0883 8.97 -1.10 -7.53 Stoxx 50 CHF UBSGroup UBSG 17.11 0.65 7.27
140
Euribor AU$ CSL CSL 132.94 0.11 32.40 € Unilever UNA 48.60 0.96 24.26
CHF ABB ABBN 24.41 0.21 13.64
One month -0.37400% -0.34300% ¥ Canon 7751 3750.00 0.73 13.81 £ Unilever ULVR 4030.00 1.46 22.40 3 10 17 24 3 10 17 24 31 7 14 21 28
€ ASMLHolding ASML 123.45 1.73 15.75
Three month -0.32900 -0.25100 ¥ CentralJapanRwy 9022 18635 0.38 -3.09 € Vinci DG 78.05 -0.06 20.63 Feb. Mar. Apr.
€ AXA CS 24.91 1.65 3.88
Six month -0.24900 -0.14200 HK$ ChinaConstructnBk 0939 6.30 -0.32 5.53 £ VodafoneGroup VOD 201.90 1.43 1.03
€ AirLiquide AI 112.35 1.58 6.34
One year -0.12100 -0.01200 HK$ ChinaLifeInsurance 2628 23.65 ... 17.08 CHF ZurichInsurance ZURN 273.70 -0.62 -2.39
176.10
Yen Libor HK$ ChinaMobile 0941 82.85 -0.12 0.79
€
€
Allianz
AB InBev
ALV
ABI 102.70
0.74 12.17
1.28 2.14 DJIA Stoxx 50
One month -0.02314% -0.05114% HK$ ChinaPetro&Chem 0386 6.24 -0.95 13.45 £ AstraZeneca AZN 4656.00 0.40 4.92 Last: 3197.87 s 19.72, or 0.62% YTD s 6.2%
Three month -0.00043 -0.02257 AU$ CmwlthBkAust CBA 86.83 -0.72 5.36 € BASF BAS 89.54 0.09 1.39
$ AmericanExpress AXP 79.55 0.40 7.38
Six month 0.02429 0.00621 ¥ EastJapanRailway 9020 10090 -0.20 -0.10 € BNP Paribas BNP 65.77 1.53 8.62
$ Apple AAPL 147.51 0.63 27.36 3225
One year 0.13214 0.10100 ¥ Fanuc 6954 22520 1.01 13.65 £ BT Group BT.A 302.50 -0.74 -17.55
$ Boeing BA 183.43 0.57 17.83
$ Caterpillar CAT 101.52 -0.48 9.46 3150
Offer Bid ¥ Hitachi 6501 623.50 -0.02 -1.34 € BancoBilVizAr BBVA 7.44 1.24 17.16
TW$ Hon Hai Precisn 2317 100.00 1.21 18.76 $ Chevron CVX 105.39 -0.50 -10.46 3075
Eurodollars € BancoSantander SAN 6.06 1.15 22.12
¥ HondaMotor 7267 3235.00 -0.31 -5.27 $ CiscoSystems CSCO 34.23 0.77 13.27
One month 1.1000% 1.0000% £ Barclays BARC 209.85 -1.13 -6.09 3000
KRW HyundaiMtr 005380 151000 4.86 3.42 $ Coca-Cola KO 43.38 0.38 4.64
Three month 1.2000 1.1000 € Bayer BAYN 110.95 -2.33 11.92
2925
HK$ Ind&Comml 1398 5.07 -0.20 9.03 $ Disney DIS 114.37 -0.31 9.74
Six month 1.3500 1.2500 £ BP BP. 449.60 1.60 -11.77
$ DuPont DD 79.92 0.54 8.88
One year 1.6000 1.5000 ¥ JapanTobacco 2914 3735.00 0.24 -2.84 £ BritishAmTob BATS 5266.00 0.98 13.95 2850
¥ KDDI 2956.50 -0.44 -0.10
$ ExxonMobil XOM 82.00 -0.07 -9.15
Latest 52 wks ago 9433 € Daimler DAI 67.96 -0.64 -3.90 $ GeneralElec GE 28.95 0.03 -8.39 3 10 17 24 3 10 17 24 31 7 13 21 28
¥ Mitsubishi 8058 2437.50 0.49 -2.11 € DeutscheTelekom DTE 16.30 1.24 -0.34 $ Feb. Mar. Apr.
Prime rates GoldmanSachs GS 225.05 0.09 -6.01
¥ MitsubishiElectric 6503 1609.00 -0.19 -1.26 £ Diageo DGE 2251.50 0.22 6.71 $
U.S. 4.00% 3.50% HomeDepot HD 154.91 0.45 15.54
¥ MitsubishiUFJFin 8306 715.90 0.59 -0.60 € ENI ENI 14.30 0.21 -7.56 $
Canada 2.70 2.70 Intel INTC 36.98 1.85 1.96
1599.00 1.11 -0.50 1572.00
Japan
Hong Kong
1.475
5.00
1.475
5.00
¥
¥
Mitsui
Mizuho Fin
8031
8411 206.70 0.73 -1.48
£
£
GlaxoSmithKline
HSBC Hldgs
GSK
HSBA 639.90
1.42 0.64 $
0.53 -2.59 $
IBM
JPMorganChase
IBM
JPM
159.14
86.50
0.19 -4.13
-0.64 0.24
Dow Jones Industrial Average P/E: 20
¥ NTTDoCoMo 9437 2680.50 0.11 0.66 € INGGroep INGA 15.12 1.17 13.09 $ J&J JNJ 123.67 0.27 7.34 Last: 20949.89 s 36.43, or 0.17% YTD s 6.0%
Policy rates
ECB 0.00% 0.00%
AU$ NatAustBnk NAB 34.01 -0.23 10.89 £ ImperialBrands IMB 3763.00 -0.50 6.22 $ McDonalds MCD 141.23 0.06 16.03
Britain 0.25 0.50
¥ NipponTeleg 9432 4839.00 0.64 -1.49 € IntesaSanpaolo ISP 2.68 0.15 10.39 $ Merck MRK 62.70 0.51 6.51 21200
Switzerland 0.50 0.50
¥ NissanMotor 7201 1076.50 1.13 -8.42 € LVMHMoetHennessy MC 228.05 0.68 25.72 $ Microsoft MSFT 69.30 -0.16 11.52
¥ Panasonic 6752 1339.00 0.11 12.57 £ LloydsBankingGroup LLOY 69.20 ... 10.70 $ Nike NKE 55.06 0.14 8.33
20650
Australia 1.50 2.00
HK$ PingAnInsofChina 2318 43.70 -0.23 12.63 € LOreal OR 184.45 0.88 6.37 $ Pfizer PFE 33.61 -0.50 3.48
U.S. discount 1.50 1.00 20100
Fed-funds target 0.75-1.00 0.25-0.50
$ RelianceIndsGDR RIGD 42.45 -1.85 34.55 £ NationalGrid NG. 1007.00 0.70 5.82 $ Procter&Gamble PG 86.21 -1.01 2.53
Call money 2.75 2.25
KRW SamsungElectronics 005930 2245000 0.63 24.58 CHF Nestle NESN 77.20 0.72 5.68 $ 3M MMM 196.46 0.85 10.02 19550
¥ Seven&I Hldgs 3382 4745.00 1.28 6.56 CHF Novartis NOVN 77.00 0.59 3.91 $ Travelers TRV 120.35 -0.68 -1.69
Overnight repurchase rates 19000
U.S. 0.98% 0.42%
¥ SoftBankGroup 9984 8478.00 0.25 9.18 DKK NovoNordiskB NOVO-B 264.70 1.19 3.93 $ UnitedTech UTX 119.30 0.32 8.83
Euro zone n.a. n.a.
¥ Sony 6758 3853.00 -0.52 17.65 £ Prudential PRU 1737.50 1.25 6.76 $ UnitedHealth UNH 174.12 -0.27 8.80 3 10 17 24 3 10 17 24 31 7 13 21 28
¥ Sumitomo Mitsui 8316 4153.00 0.73 -6.88 £ ReckittBenckiser RB. 7126.00 0.21 3.49 $ Visa V 92.47 1.33 18.52 Feb. Mar. Apr.
Sources: WSJ Market Data Group, SIX HK$ SunHngKaiPrp 0016 117.40 0.60 19.80 £ RioTinto RIO 3046.00 -0.52 -3.56 $ Verizon VZ 45.91 0.07 -13.99 Note: Price-to-earnings ratios are for trailing 12 months
Financial Information, Tullett TW$ TaiwanSemiMfg 2330 196.50 1.03 8.26 CHF RocheHldgctf ROG 262.60 0.88 12.90 $ Wal-Mart WMT 75.53 0.40 9.27 Sources: WSJ Market Data Group; Birinyi Associates
 For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
THE WALL STREET JOURNAL.
Real-Estate Market Is Booming Anew
Industry professionals
say low rates, not
speculative loans, are
the reason this time
BY KOSAKU NARIOKA
TOKYO—In the nation that
spawned the mother of all
modern real-estate bubbles
three decades ago, market
conditions these days feel
slightly familiar.
Real-estate loans are at a
record, and top buildings are
selling for more than 30 times
their annual income. Develop-
ers are racing to put up more
office towers even though the
population is declining.
Is the dreaded b-word back
in Japan? Not really, say local
real-estate players, but they
caution that the current boom
may be reaching its limits.
What distinguishes today
from the late 1980s is the na-
ture of the participants in the
market and their expectations.
Back then, companies in other
fields such as electronics or
retail made big bets on real
estate, borrowing money for
speculative projects on the as-
sumption that prices would
keep rising fast. When the
market turned, that was a rec-
ipe for a crash and a nation-
wide plague of vacant lots.
Today, the market is largely
dominated by real-estate pro-
fessionals, and their calcula-
tion is a simple one: With
long-term interest rates in
Japan around zero due to
years of easing measures by
the Bank of Japan, a building
that returns 3% or so on an in-
BUDDHIKA WEERASINGHE/GETTY IMAGES
Local officials want to develop a casino resort on Yumeshima, or ‘dream island,’ in Osaka Bay.
Osaka Is Dreaming Big
Over Casino Island Project
BY MEGUMI FUJIKAWA
OSAKA, Japan—This com-
mercial city has long been sec-
ond to Tokyo. Now, with Japan
weighing whether to approve
casino projects that could cost
some $10 billion to build, Osaka
is wagering it can be No. 1 in
gambling and entertainment.
The city’s hopes center on
Yumeshima, or “dream island,”
a man-made patch in Osaka
Bay where it says about 170
acres lie waiting for a casino-
centered resort.
“Osaka is geographically
advantageous because it’s only
one hour away from popular
tourism destinations like Nara
and Kyoto,” said Osaka Gov.
Ichiro Matsui in an interview.
“We also have a lot of unused
land. We plan to make
Yumeshima into Osaka’s base
for entertainment.”
Japan’s turn to casinos,
many years in the making, has
become less of a sure bet in an
era when gambling meccas
have multiplied around the
world. In the U.S., states once
saw casinos as a path to riches,
but with the market getting
more crowded, some traditional
casino states such as New Jer-

INTERNATIONAL PROPERTY: JAPAN
An office and shopping-mall complex in Tokyo’s Ginza district, the site of sharp jumps in land prices, is festooned with balloons.
vestment should be a fine
deal, even if prices don’t go
higher.
“We love being borrowers
here,” said Eric Adler, chief
executive of PGIM Real Es-
tate, which is part of U.S. life
insurer Prudential Financial
Inc.’s investment-management
arm. PGIM Real Estate typi-
cally borrows 40% to 65% of
the price of properties it buys,
according to a spokeswoman.
Blue-chip borrowers such as
big companies and real-estate
investment trusts can borrow
at 1% or less for 20 years, says
Asahi newspaper and Asahi
Broadcasting Corp.
Still, the government of
Prime Minister Shinzo Abe is
pushing ahead. Parliament last
December passed a law open-
ing a path to the legalization
of casinos, and further legisla-
tion, expected by this year or
early 2018, will give the final
go-ahead if passed.
Global casino chiefs say they
are ready to spend $10 billion
or more to set up shop in
Japan. Some operators, includ-
ing Melco Crown Entertain-
ment Ltd. and MGM Resorts
International, have released
conceptual drawings of the re-
sorts they want to build on
Osaka’s “dream island.”
Osaka is the only big
city in Japan with
real estate set
aside for a casino.
Advocates of legalization
avoid the term casino in favor
of “integrated resort.” While
Japanese may envision a
Hideaki Suzuki, head of Japan
research at brokerage Cush-
man & Wakefield.
On a recent visit to Tokyo,
Mr. Adler said PGIM Real Es-
tate was interested in buying
Tokyo retail and office proper-
ties as well as hotels. Over the
long run, the firm is looking to
increase its investments in
Japan to $5 billion from about
$1.5 billion, though the pace
will depend on “the ability to
find good deals at good pric-
ing,” he said.
An annual government sur-
vey released recently found
thinks the first casino in
Osaka can open by 2023.
Osaka is the only big city in
Japan with real estate set
aside for a casino. The island
created by landfill eventually
could hold multiple resorts,
said Global Market Advisors, a
Las Vegas-based gambling in-
dustry consultant, in a report.
It added that Osaka could
generate more than $10 billion
a year in gambling revenue,
compared with $5 billion from
Singapore’s two casinos.
If so, visitors from South
Korea, Taiwan, Southeast Asia
and, above all, mainland China
will be the ones to make it
happen. Already, Osaka is
teeming with Asian visitors.
Nearby Kansai International
Airport has become the na-
tion’s biggest hub for budget
carriers, and about 90% of for-
eign visitors passing through
it are from Asia.
Industry executives say any
casino in Japan would likely
have an international operator,
with U.S. companies such as
Wynn Resorts and Las Vegas
Sands Corp. top contenders.
Osaka has been a trading
hub for more than 1,000 years,
and for much of that time out-
land prices surged 25% or
more last year in several
prime locations.
New loans to the real-estate
sector rose 14% to ¥14.7 tril-
lion ($132 billion) in 2016, ac-
cording to the Bank of Japan,
the highest on record since
data became available in 1977.
High-quality Tokyo of-
fice space yields 2.9 percent-
age points over the 10-year
government bond in Japan,
compared with a 1.1-per-
centage-point gap in New
York and 2.3 percentage points
in London, according to bro-
Land-Squeezed Developers
Transform Offices Into Hotels
BY KOSAKU NARIOKA
TOKYO—American real-es-
tate developer Seth Sulkin
thought the surge of tourism
in Japan meant the time was
right to build more hotels, but
he was having trouble finding
empty lots in the country’s
packed cities.
One answer: Buy office
buildings and convert them.
This November, in a 10-story
building that once housed of-
fices, a 205-room hotel under
Marriott International Inc.’s
boutique Moxy brand is set to
open near the temple in
Asakusa, a top Tokyo tourist
destination.
“It’s very difficult to buy
land and buildings now,” says
Mr. Sulkin, chief executive of
Pacifica Capital KK, which de-
veloped the more than $50
million project. He says the
property will target younger
travelers and charge about
$150 a night to start.
While the country’s domes-
tic labor force is set to shrink
as the population ages, tour-
ists are flooding in.
Visitor arrivals hit a record
24 million last year and rose
14% in the first quarter of this
ADVERTISEMENT
Business Real Estate & Services
()*+,-.( /(0* (,0( /+1-2
  
Wednesday, May 3, 2017 | B9
chance,” Mr. Kosaka said.
Of course, a sharp economic
downturn could still cause
pain. This is especially true for
investors who are buying land
or fixer-upper properties ex-
pecting to boost cash flow.
Already there are signs the
expansion may have run its
course. Office rents are level-
ing off even though occupancy
rates are high, because tenants
figure they have more bargain-
ing power with so many new
buildings going up. Cushman &
Wakefield projects that rents
sought by office landlords will
drop about 8% by the end of
2020.
Some bankers say their tol-
erance for ever-narrower loan
spreads is reaching a limit af-
YOSHIO TSUNODA/AFLO/ZUMA PRESS
ter years in which they were
eager to give favorable terms
for real-estate projects.
Michiya Fujii, head of real-
estate finance at Tokyo Star
Bank Ltd., said he believed
property values were getting
artificially stretched by the
availability of cheap loans. The
bank trimmed loans in the
year ended in March, focusing
kerage Jones Lang LaSalle on longstanding clients.
Inc. That is because govern- “We don’t need to push our-
ment debt yields more in the selves anymore,” said Mr. Fujii.
U.S. and the U.K. Eiji Sakaguchi, chief execu-
Developer Mori Building tive of brokerage CBRE’s
Co. is undertaking one big Japan unit, said property
project after another in the prices likely hit a peak in the
heart of Tokyo, increasing its latter part of 2016. But he said
borrowing 10% from three he didn’t anticipate a sharp
years ago to ¥968 billion at downturn because lending
the end of September 2016. practices today are far more
Mori Building executive Yui conservative than they were in
Kosaka said the company has the late 1980s.
been extending the length of Even with a glut of new of-
its borrowing on the assump- fices, rents would drop about
tion that rates can’t fall much 10%, he said. “That’s not a
further. “We see this as our crash.”
year, according to the Japan Japan rose 8% to ¥364 billion
National Tourism Organiza- ($3.3 billion) last year, the
tion. The government is tar- highest level since the global
geting 40 million annually by financial crisis, according to
2020, when Tokyo plays host Jones Lang LaSalle Inc.’s Ho-
to the Summer Olympics. tels & Hospitality Group.
“In many locations, hotels Most of Japan’s recently
make more money than office developed hotels offer either
buildings,” says Mr. Sulkin, budget-style, business lodg-
whose firm has similar con- ings with tiny rooms on one
version plans for an 11-story end and large, full-service, lux-
office building near the Osaka ury accommodations on the
bullet-train station. other. Neither type is ideal for
Other investors that have middle-class families from
converted offices to hotels or China, Taiwan, Hong Kong and
plan to include Fortress In- South Korea, the sources of
vestment Group LLC, Gold- most of Japan’s visitors.
man Sachs Group Inc. and La- “There is a huge mismatch
Salle Investment Management between the existing stock and
Inc. the demand from travelers,”
Revenue per available says Jon Tanaka, head of
room, an industry metric, Japan real estate for Angelo
climbed in Japan an aggregate Gordon & Co. Domestic travel
59% on a local currency basis by Japanese baby boomers is
in the five years through 2016, another source of growth, he
according to STR, an industry says.
data and analytics firm. The Empty lots are hard to
81% occupancy rate in Japan come by in city centers. When
in the first quarter of this year land becomes available, com-
was higher than the U.S.’s 61% petition drives up the price
and the U.K.’s 71% despite the among developers of condos
average daily room rate of and offices. In a typical con-
$132 in Japan being higher version project, developers
than U.S.’s $124 and the U.K.’s keep the existing structures
$104. but renovate and reconfigure
Hotel-sales transactions in the interiors.
 
      

   

 


sey have taken a big hit. “smoky” place “from the 1950s shone the region around what    

          

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For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
B10 | Wednesday, May 3, 2017
Energy Stocks Are Stuck in a Rut Shares
Inch Up
Slumping crude prices
sink valuations even
as many producers are
posting profits again
BY AKANE OTANI
Energy shares have been
the stock market’s worst-per-
forming sector this year,
weighed down by slumping
crude prices even as many oil-
and-gas companies return to
profitability.
Shares of energy companies
were down 10% in 2017
through Monday, making the
sector one of only two S&P
500 groups posting losses this
year, along with the telecom-
munications sector. The
broader index was up 6.7%
through Monday.
Oil-and-gas companies’ lag-
gard performance marks a re-
versal from last year, when
these companies gained more
than any group in the S&P in-
dex. A doubling in oil prices
from their February lows helped
propel the sector 24% higher in
2016, while supply cuts from
OPEC members and other major
oil-producing nations set a bull-
ish tone going into 2017.
But oil prices have slipped
more than 9% this year as
shale producers have ramped
up production, raising angst
again about an oversupplied
market. Investor concerns that
energy stocks look overvalued
after last year’s big run is also
hurting shares, analysts said.
Sluggish oil prices can af-
fect a broad range of compa-
nies beyond the major oil pro-
ducers. Long slumps can hurt
profits for those dependent on
spending by the oil industry,
such as steel, equipment and
machinery companies, said
Mike Wilson, chief U.S. equity
strategist at Morgan Stanley.
Many investors have been
counting on strong corporate
earnings for the first quarter
to reverse the recent share
price skid. Exxon Mobil Corp.
and Chevron Corp., the U.S.’s
Email: heard@wsj.com
AMD’s Sales
Chip Away
At the Hype
Advanced Micro Devices
probably will be fine. Its
stock may not be for a while.
The chip maker said late
Monday that it managed to
boost revenue by 18% year
over year in the seasonally
weak first quarter. That was
helped by a new chip called
Ryzen designed for high-per-
formance personal comput-
ers. Ryzen sales began late in
the quarter, yet the chip still
managed to help boost sales
in AMD’s computing and
graphics division to $593 mil-
lion—up 29% year over year
and the best performance on
record for the division.
That is a good start. The
problem is that AMD’s stock
was priced for well beyond
good, having gone from a lit-
tle over $3 a year ago to
Monday’s closing price of
$13.62. With the shares near
a 10-year high and short in-
terest having shot up from
9% to 13% since the first of
the year, the chip maker
faces the problem of failing
to clear a high bar. Shares
were down 23% in afternoon
trading Tuesday.
It is too early to judge the
company’s recovery. Ryzen
doesn’t have a full quarter of
sales under its belt. And new
AMD chips for the graphics
processing and server markets
have yet to launch. The latter,
a server chip code-named Na-
ples, will be challenging Intel
in its key market, so it cer-
tainly won’t go unnoticed.
AMD projected a 12% year-
over-year revenue gain for
the second quarter, slightly
better than the 9% gain ana-
lysts expect. But AMD also
said full-year revenue will
likely grow in the low dou-
ble-digit-percentage range, in
line with Wall Street’s tar-
gets. That is a sign AMD is
being cautious. Investors
should be, too.
—Dan Gallagher
Underperformers
The performance of oil and gas stocks trails all other S&P sectors this year. Despite a recent turnaround in profits
from major oil producers, volatile crude prices and fears of too much supply have punished energy shares.
Year-to-date performance
10%
5 S&P 500
0 higher Tuesday as investors
–5
–10
–15
–20
–25
–30
Jan.
Earnings for big companies like Exxon
Mobil and Chevron are improving…
Profit/loss, quarterly
$6 billion
Exxon Mobil
Chevron
4
2 500 having reported their re-
0 the third quarter of 2011, ac-
–2
2015 ’16
Note: As of Monday
Sources: FactSet (performance); the companies (earnings); WSJ Market Data Group (prices); U.S. Energy Information Administration (stockpiles)
biggest oil companies, re-
ported their highest quarterly
profits in more than a year
last week, driven by the recov-
ery in oil prices from their
2016 lows, revenue from new
projects, and cost-cutting mea-
sures.
But strong initial results
that have mostly beaten ana-
lyst expectations have done
little to lift energy stocks. U.S.
crude prices fell 2.4% to $47.66
a barrel on Tuesday.
“The uncertainty of the out-
look for oil has really put pres-
HEARD ON THE STREET
European Banks’ Losing Quarter
When it comes to invest-
ment banking, the first quar-
ter of 2017 isn’t turning out
as advertised.
Given the dire start to
2016 and the tidal wave of
positive sentiment after Don-
ald Trump’s presidential vic-
tory, the signs were that a
great rebound was coming.
But with the big five U.S.
banks and four of Europe’s
largest having reported, the
revenue recovery doesn’t
look as strong as investors
might have hoped.
Altogether, total revenue
in dollar terms for these big
banks is only about 13%
higher than the first quarter
last year. That includes
fixed-income and equities
trading, along with fees for
capital and fundraising,
some lending and advising
on deals.
To give that some context,
look at just how bad the
start of 2016 was: Total rev-
enue from the world’s 12
largest investment banks in
last year’s first quarter
Chinese Real Estate Thrives as Stocks and Bonds Suffer
Talk to any young adult in
a big Chinese city and the
subject of yali, or pressure,
will quickly come up.
China is without a doubt a
high-pressure society: In-
equality is intense, pollution
and traffic are often unavoid-
able, and family obligations
can be overwhelming.
A high-pressure environ-
ment is a good metaphor for
Chinese markets, too. Because
of the nation’s capital con-
trols, investment options are
limited, and regulatory crack-
downs have a tendency to
push leverage around rather
than get rid of it.
The curious resurgence in
2017 of Chinese property
prices, which spent most of
late 2016 slowing only to
shoot upward again in Febru-
ary and March, looks to be an-
MARKETS
Feb.
...But U.S. crude prices have
been falling much of this year…
Nymex crude-oil prices
$56 a barrel
54
52
50
48
46
’17 Jan.
sure on energy stocks,” said
Karyn Cavanaugh, senior mar-
ket strategist at Voya Invest-
ment Management.
Oil prices rallied late last
year after the Organization of
the Petroleum Exporting Coun-
tries reached a November deal
to cut production, with U.S.
crude jumping 8.7% between
the agreement and year-end.
But this year U.S. refiners
have ramped up output and
are processing more crude oil
than ever before. That has led
to big increases in gasoline
FINANCIAL ANALYSIS & COMMENTARY
Can’t Win ’Em All
First-quarter investment-
banking and markets revenue,
change from a year earlier
Morgan Stanley
Bank of America
Citigroup
J.P. Morgan
Credit Suisse 10%
UBS 7%
Goldman Sachs 3%
Deutsche Bank –1%
Barclays –6%
Note: Including securities trading, investment
-banking fees and some lending; in dollar
terms, exchange rates at March 31 each year.
Source: the companies
THE WALL STREET JOURNAL.
dropped 25% from the same
period in 2015, according to
research firm Coalition.
The recovery has been un-
evenly spread: Morgan Stan-
ley and Bank of America saw
the strongest total revenue
growth across these busi-
nesses year over year in the
U.S. and globally.
In Europe, Credit Suisse
Group has done best in dol-
Full House
Chinese housing prices, change
from a month earlier
4%
2 Cities
0 Tier 1
–2
2013 ’14 ’15 ’16
Source: CEIC data
THE WALL STREET JOURNAL.
other example of this dynamic
at play.
The property market re-
bound has coincided with two
big domestic policy develop-
March April
...And oil stockpiles have been
rising as producers ramp up.
U.S. crude-oil stocks, weekly
550 million barrels
500
450
400
350
300
Feb. March April May
stockpiles, which could be-
come a drag on crude and
could undermine OPEC’s at-
tempts to combat a global sup-
ply glut.
The number of rigs drilling
for oil in the U.S. remains dou-
ble the low it fell to less than a
year ago, according to data
from industry group Baker
Hughes Inc.
High valuations for oil-and-
gas companies also have
weighed on sentiment. Energy
stocks in the S&P 500 trade at
28 times the profits analysts
31%
27%
19%
17%
ASSOCIATED PRESS
Credit Suisse CEO
Tidjane Thiam
lar terms followed by cross-
town rival UBS Group, but
their pace of growth lagged
far behind all U.S. rivals ex-
cept Goldman Sachs Group.
Meanwhile, Deutsche Bank
and Barclays went backward,
with the latter performing
worst.
BNP Paribas, HSBC Hold-
ings and Société Générale
are due to report this week
ments. First, as the economy
has improved, regulators have
become increasingly vocal
about financial market “de-
leveraging,” though actual re-
duction of leverage ratios is
unlikely.
A two-year high in inter-
bank interest rates, engineered
Tier 2 by the central bank, has rattled
Tier 3 bond markets and cut off a
stock-market rally.
Meanwhile, stricter capital
controls have helped choke off
capital flight.
Following two years of de-
’17 clines, China’s foreign-ex-
change reserves began rising
again in February. Domestic
credit growth has slowed, but
remains elevated.
Total financing to the real
economy (including local gov-
ernment debt) was up more
than 15% year over year in
THE WALL STREET JOURNAL.
S&P 500 oil and gas
storage and transportation
sub-industry
S&P 500 energy sector
S&P 500 oil and gas
drilling sub-industry
May
2014 ’15 ’16 ’17
THE WALL STREET JOURNAL.
expect companies to earn over
the next 12 months, according
to FactSet. The broader S&P
500 trades at 18 times earn-
ings estimates, according to
FactSet.
Still, some recent data have
been more encouraging. Vola-
tility in the oil markets has
waned this year, a potentially
bullish indicator for financial
markets. OPEC is also expected
to meet May 25 to discuss ex-
tending its production cuts, a
move that many analysts say
could boost the oil market.
and could improve the Euro-
pean picture overall, but as
things stand it looks as if
Europeans are continuing to
lose ground to their larger
U.S. rivals.
Despite hopes that nor-
malization of central-bank
monetary policies might
spur more variety in market
performance and so more ac-
tive trading and fund man-
agement, volatility remains
low in many assets. There
are few signs that invest-
ment banking will get to see
the kind of revenue it saw in
the past this year or perhaps
ever.
There is no sense in try-
ing to be No. 1 for its own
sake. Banks should focus on
making decent profits, as the
head of one European bank
put it last week. Right now,
however, most European
banks appear to be losing
share, struggling to make
any money or both. That
isn’t a good advertisement
for anything.
—Paul J. Davies
March, just marginally below
the 17% peak in 2016.
All that money needs some-
where to go. And with stocks
and bonds under pressure, and
sending money abroad to buy
Italian soccer clubs and dollar
bonds getting tougher, cash is
instead heading back into Chi-
nese investors’ old standby:
real estate.
If the renewed momentum
in the property market were
sustainable, that would be a
big shot in the arm for
China.
The problem is that all the
money being squeezed into
real estate and out of stocks
and bonds could just as eas-
ily run out once the current
crackdown loses steam and
regulatory spotlights focus
again squarely on curbing
real-estate speculation, as
On Mixed
Earnings
BY AKANE OTANI
AND RIVA GOLD
U.S. stock indexes edged
assessed a mixed batch of cor-
porate earnings.
The Dow Jones Industrial
Average rose 36.43 points, or
0.2%, to 20949.89. The S&P
500 and the Nasdaq Compos-
ite both ad-
TUESDAY’S vanced 0.1%.
MARKETS In Europe,
the Stoxx Eu-
rope 600 rose
0.7% to 389.53, with BP among
the best performers, up 1.6%,
after the oil company reported
a sharp rise in first-quarter
profit. European markets re-
opened after a holiday.
Major U.S. stock indexes
have mostly climbed over the
past two weeks, supported by
reports pointing to corporate
strength. With more than two-
thirds of companies in the S&P
sults, firms are on track to
post their best results since
cording to FactSet.
Still, some investors cau-
tion that stocks in the U.S.
look expensive relative to their
historical averages, making
them vulnerable to a pullback.
Earnings in Europe are so
far on track to grow close to
20% in the first quarter from a
year earlier, although the
muted reaction to results so
far suggests some degree of
optimism is already priced
into stock prices, according to
strategists at Morgan Stanley.
Mastercard shares gained
1.5% by late afternoon after the
firm posted higher-than-ex-
pected revenue and growth in
earnings as transactions rose.
Cummins jumped 6.1% after
the engine maker raised its fore-
cast for the rest of the year.
WSJ.com/Heard
OVERHEARD
Good news for those who
enjoy, or had been waiting to
enjoy, a pint of Guinness.
The Irish brewer, owned by
Diageo, says its draft beer is
finally suitable for vegans.
While the beefy brew had
no actual meat in it before
this, the filtration process
used isinglass made with fish
guts.
That put it off limits for
strict vegans.
Now, the famous brewer
says drafts from kegs brewed
at its historic St. James’s
Gate brewery in Dublin are
fish-guts free.
Bottles and cans—if that is
how you must consume Guin-
ness—will be safe at the end
of this year.
Vegans concerned about
animal products in their fa-
vorite plonk need not fret.
Vegan beer and liquor guide
Barnivore says it has checked
31,667 brands of alcohol, and
all top beer brands in the
United States are fish-gut
free.
they did toward the end of
2016.
And the fundamentals for
Chinese property look more
mixed than justified by the re-
cent price rally.
Actual real-estate invest-
ment ticked up marginally in
March to 9.4% growth year
over year, but remained well
below its October 2016 peak of
over 13%.
Steel and other commodity
prices have also been under
pressure in recent weeks, rais-
ing questions about the
strength of real demand in
China, which consumes about
half the world’s steel. Weak
purchasing managers indexes
out this week add to these
worries.
Too much pressure inevi-
tably leads to cracks.
—Nathaniel Taplin